Identifying Earnings Assimilation of Immigrants Under Changing Macroeconomic Conditions

Failure to account for differences between immigrants and natives in their responsiveness to changes in macroeconomic conditions may bias estimates of assimilation effects on immigrant earnings. Using Norwegian register data from 1980 to 1996, we first establish that earnings of immigrants from non-OECD countries exhibit greater sensitivity to local unemployment than do earnings of natives. The empirical analysis further reveals that standard methods of estimation - which fail to consider differential immigrant and native responsiveness - understate earnings growth and overstate cohort differentials among non-OECD immigrants. These biases are attributable to trends in macroeconomic conditions over the sample period