1. The role of foreign language skills in the labor market
Discussant:
Quy-Toan Do (World Bank)

2. QUESTION: The role of foreign language skills in labor market integration in Estonia
METHODS: Multivariable regression analysis: comparison of outcomes for individuals with language skills versus without
FINDINGS: Returns to language skills high, especially among migrants
Summary

3. Contributions Elicitation of language skills
Measurement of labor market outcomes (more accurate wage measure)
Asks the question of language skills in the context of labor market integration
Description of language skill distribution (esp. age)
Contributions

4. From regression results to policy implications
Correlation versus causation
Multivariate regression analyses
Agenda for future research
From regression results to policy implications

5. Correlation vs Causation

6. The policy question we are ultimately after:
Does language skills cause better labor market integration (higher likelihood of being employed, higher wages, etc.)?
By how much will the likelihood of being employed (resp. wages) be increased if we were to suddenly increase someone’s language skills?

7. Correlation vs. Causation
Robin Williams on Bono and infant mortality

8. The findings of this (class of) paper(s)
Better labor market outcomes are associated with (related to) higher language skills.
Three possibilities:
A causal interpretation
People working have incentives and exposure to learn a language (reverse causation)
More productive people are also better at acquiring language skills among other skills (omitted variables - musical skills)

9. The findings of this (class of) paper(s)
Better labor market outcomes are associated with (related to) higher language skills.
Three possibilities:
A causal interpretation
People working have incentives and exposure to learn a language (reverse causation)
More productive people are also better at acquiring language skills among other skills (omitted variables - musical skills)

10. Multivariate regressions: what do they achieve?

11. Multivariate regression analysis
Multivariate regression: “How does labor market outcomes vary between one individual with English skills and one without English skills, ceteris paribus”
Fundamental question: have we managed to make everything else equal with the regression specification?
Observables
Unobservables

12. What variables to choose?
Language skills
What variables to choose?
Type of job
Over-controlling
Labor market outcomes

13. What variables to choose?
Language skills
What variables to choose?
Type of job
Under-controlling
Labor market outcomes

14. Baseline specification
Linear regression Number of obs = ,847
F(48, 2798) =
Prob > F =
R-squared =
Root MSE =
| Robust
learn | Coef. Std. Err t P>|t| [95% Conf. Interval]
eng2 |
eng3 |
fin2 |
fin3 |
“Replication” of Valk and Simmul (2018)
Log of earnings instead of earnings
Imperfect match of variables
13 percent return on English
18 percent return on Finnish

15. Drop occupation Same LHS specification
Drop “field of activity” and “occupational group” variables
17 (instead of 13) percent return on English
19 (instead of 18) percent return on Finnish

16. Drop education and residence
34 percent return on English (baseline is 13)
22 percent return on Finnish (baseline is 18)

17. Change in functional form
Baseline regression controls for age with a quadratic function (age and age squared)
This specification uses only the binary variable age>40
Returns to English is 10 percent (instead of 13)
Returns to Finnish is 20 percent (instead of 18)

18. Going beyond observational data

19. Quasi-experimental data
Did history, background, policies create variation in language skills that are not related to labor markets?
Age of arrival (affects ability to learn new languages)
Linguistic distance for migrants
Language skills at time of migration

20. Randomized-controlled trials
Language enhancement interventions to randomly chosen group and comparison with control group
Solves the problem of omitted variables
Solves the problem of reverse causation
Most (if not all) of literature focused on children: impact of language skills mediated through education.

21. Policy questions
Language is transferable skill but more early in life rather than late
Most effect detected in the literature:
Language skills ⇒ Education ⇒ Cognitive skills ⇒ Labor markets
What is the (social and private) returns of investments in language skills and how do they vary with age?