This study uses the concept of stochastic frontiers for analyzing the income disparity between ethnic groups in West Germany. Estimation of a potential rather than an average earnings function increases the explanatory power of the human capital approach and allows for detecting discrimination...

Immigrants in Germany display a poor earnings performance relative to natives. Arguing that human capital endowments identify earnings potentials rather than actual earnings, this paper estimates a stochastic earnings frontier and searches for systematic differences between natives and migrants...