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What lies behind the immigrant wage gap: the role of labor market sorting and peer effects
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In this study, we analyze the impact of immigrant and native peers’ ability on immigrant
and native workers’ wages, using rich matched employer-employee data on the Portuguese la bor market. We employ an estimation strategy that circumvents problems of endogeneity and
show that, when both worker and peer are natives or immigrants, a one standard deviation in crease in the average quality of peers increases wages by 2.21% or 1.18%, respectively. We
also find that these peer effects account for 4.47% of the immigrant wage gap, while the es tablishment/occupation/year component explains 52.30%, and the worker component explains
43.23% of the wage differential.
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Immigrants Wage Gap Labor market sorting Peer efects Gelbach decomposition Matched employer-employee data High-dimensional fixed effects model