Immigrants and Earnings Inequality: Evidence from Hong Kong

Using data from 1991 to 2006 in Hong Kong, this paper documents how the distribution of workers’ earnings and the inequality of immigrants’ and natives’ earnings changed over time. We decompose earnings inequality to explore how the changes in immigrants’ share of the labor force have affected earnings inequality. We find that the increase in overall inequality can be explained by the increase in the within-group variance of natives. A nonnegligible part of the increase in inequality for women is due to the expansion of between-group variance caused by the large inflow of low-income immigrants from developing countries.