1. Assimilation of Immigrants in Spain: A Longitudinal Analysis Mario Izquierdo, Aitor Lacuesta Banco de España Raquel Vegas FEDEA
Raquel Vegas Sánchez
XIII SIMPOSIO DE ANÁLISIS ECONÓMICO
Diciembre 2008

2. Question of the paper
Does it exist earnings assimilation of non EU-15 immigrants in Spain?
What are the mechanisms urderlying assimilation?
Earnings Assimilation :
As immigrants spend time in the host country, they adapt pre-existing skills and acquire new country specific skills that yield a payoff, decreasing the differences respect to the native population.
Immigrants have lower social attachments and might benefit more than natives from wage differentials across regions.

3. Question of the paper
The basic framework to study assimilation of earnings is based on Chiswick (1978):
Research has found that the initial differential for Mexicans is at least 40% and one year more in the host country approximately closes the gap with natives 2%
In Spain Amuedo-Dorantes & de la Rica (2007) use the EES 02 & Census data to find that immigrants from no EU-15 earn 30% less that spaniards. This gap decreases in 15pp during the first five years.
wnative
wimmigrant
Wages
Age

4. Question of the paper
Previous regression with a single or repeated cross sections incurred in several problems:
Change in the quality of migrants arriving in different years
Selective emigration
Using longitudinal data we solved both problems:
Lubotsky (2007) Uses Social Security Records matched with CPS to obtain slightly slower assimilation profile due to the decrease in quality of recent immigrants and selective outmigration.
No research in Spain using longitudinal data in wages. Fernandez & Ortega (2006) uses repeated cross sections of Labor Force Survey to study assimilation in labor conditions.
There are other problems that we cannot solve with longitudinal data: separate the effect of time, year of birth and experience.

5. Outline Empirical Strategy Data Results
Change in immigrant cohort of entry and selective emigration
Mechanism underlying assimilation

6. Empirical Strategy Earnings of nationals: Earning of immigrants:
What is assimilation?

7. Empirical Strategy Pooling all together :
What are the problems of using single/repeated cross section?
Assimilation is upward estimated in single/repeated cross section if:
The quality of new immigrants decreases.
Those who stay are better.
Assimilation is downward estimated in single/repeated cross section if:
The quality of new immigrants increases.
Those who leave are better.

8. Empirical Strategy
1) Change in the quality of migrants arriving in different years:
Wages in euros 2005
Wnative
Wimmig (entry in 2001)
Wimmig (entry in 2005)
Decreasing quality of immigration
ysm=0
ysm=4
Years since migration

9. Empirical Strategy
1) Change in the quality of migrants arriving in different years. In a single cross section,
when I vary ysm I vary the cohort of entry.
Wages in euros 2005
Wnative
Wimmig (entry in 2001)
Wimmig (entry in 2005)
Decreasing quality of immigration
ysm=0
ysm=4
Years since migration

10. Empirical Strategy
1) Change in the quality of migrants arriving in different years. In a single cross section,
when I vary ysm I vary the cohort of entry.
Wages in euros 2005
Wnative
Wimmig (entry in 2005)
Wimmig (entry in 2001)
Increasing quality of immigration
ysm=0
ysm=4
Years since migration

11. Empirical Strategy
1) Change in the quality of migrants arriving in different years. In a repeated cross section, I follow the same cohort of entry over time solving the problem, but…
Wages in euros 2005
Wnative
Wimmig (entry in 2001)
ysm=0
ysm=4
Years since migration

12. Empirical Strategy
- 2) Selective emigration. Those who stay longer, are a selected group of immigrants
And this cannot be solved by using repeated cross sections.
Wages in euros 2005
Wnative
Wimmig (migrants who entered in 2001 and stayed for 4 years)
Wimmig (all migrants who entered in 2001)
Leavers are failures in Spain
ysm=0
ysm=4
Years since migration

13. Empirical Strategy
2) Selective emigration. Those who stay longer, are a selected group of immigrants
And this cannot be solved by using repeated cross sections.
Wages in euros 2005
Wnative
Wimmig (all migrants who entered in 2001)
Wimmig (migrants who entered in 2001 and stayed for 4 years)
Leavers are those who succeed in attaining the savings target.
ysm=0
ysm=4
Years since migration

14. Empirical Strategy
Both problems solved using longitudinal data. We observe the individual history, therefore we could estimate the actual wage growth of stayers.
Wages in euros 2005
Wnative
Wimmig (all migrants who entered in 2001 and stayed until 2005)
ysm=0
ysm=4
Years since migration

15. Outline Empirical Strategy Data Results
Change in immigrant cohort of entry and selective emigration
Mechanism underlying assimilation

16. Data
We use MCVL 2005B:
Social Security records. 4% random sample of all individuals who have been afiliated in S.S. during Earnings are top coded.
Studies show that aggregate figures from the Labor Force Survey (type of contract, duration of working day, sector of activity and % of self employment) are similar to the figures from MCVL.
“COMPARACIÓN DE LAS MAGNITUDES ESTADÍSTICAS DEL EMPLEO SEGÚN LA ENCUESTA DE POBLACIÓN ACTIVA Y LA MUESTRA CONTINUA DE VIDAS LABORALES” Beatriz Ramos Muñoz (2007).
Main diferences appear from the importance of the informal sector.

17. Data Description of sample: Description of variables: Daily earnings:
We drop paid unemployment spells
We keep only General Regimen employment spells
We keep workers who begin their labour career after 1979
We keep a random subsample of 50% of natives and all migrants. Results for males 25-55
We cannot perform OLS regressions due to top coding; we do median regressions (Powell, 1984)
Description of variables:
Daily earnings:
- The sum of all Social Security contributions in one particular month divided by the number of days worked during that month. If there is no contribution we set a missing value.
- The sum of all Social Security contributions in the year divided by the number of days worked during that year. If there is no contribution we set a missing value.
Experience:
- Nationals: All years since the first entry in the Social Security System.
- Immigrants: All years since the first entry in the Social Security System (years since migration)+potential experience before first entry in SS.
Moreover:
Unobserved experience abroad & here
Lubotsky shows that there are quantitative differences depending on the way experience abroad is especified. Regularizations: (38.181); 1991( ); 1996(21.300); 2000( ); 2001( ); 2005( )
Data

18. Data
Organization of the data set: One observation is a daily earning in a point in time given the characteristics of the worker.
Jun 83
Dec 83
Sep 90
Dec 05
Work
Out SS
Ind 2
Feb 80
Apr 81
Sep 82
Unempl
Ind 1
Individual
Experience
Date
Wage
Individual
Experience
Date
Wage 2 1
jun-83 x1 1 1
feb-80 w1 2 2
jun-84 . 1 2
feb-81 w2 2 3
jun-85 . 1 3 .
feb-82 … … … … 1 4
feb-83 w4 … … … … 2 8
jun-90 .

19. Data
Organization of the data set: One observation is a daily earning considering all year information.
Jun 83
Dec 83
Sep 90
Dec 05
Work
Out SS
Ind 2
Feb 80
Apr 81
Sep 82
Unempl
Ind 1
Individual
Experience
Date
Wage 1 80
W*1 2 83
X*1 81
W*2 84 . 3 82 85 4
W*4 … 8 90 9 91
X*9

20. Outline Empirical Strategy Data Results
Change in immigrant cohort of entry and selective emigration
Mechanism underlying assimilation

21. Results
Median real earnings of natives males, by total experience

22. Results
Median real earnings of immigrants males, by total experience

23. Results
Median real earnings of immigrants males, by years since migration

24. Results
We estimate a quantile regression in the median

25. Results

26. Results

27. Outline Empirical Strategy Data Results
Change in immigrant cohort of entry and selective emigration
Mechanism underlying assimilation

28. Change in immigrant cohort of entry and selective emigration
Change in quality of migrants in Spain over time:
upgrade in inmigrants entry cohorts, selective emigration, both ¿?
Increasing importance of migrants from enlargement
Survey of Residential Variation

29. Change in immigrant cohort of entry and selective emigration

30. Outline Empirical Strategy Data Results
Change in immigrant cohort of entry and selective emigration
Mechanisms underlying assimilation

31. Mechanisms underlying assimilation
Lower mobility costs of migrants
Interprovincial migration
Human capital acquisition in the host country
Sectoral mobility
Changes in the company they work
Changes in the occupation within the company
Other

32. Mechanisms underlying assimilation: strategy
Grease the wheels
Regional mobility
Skill/abilities outside firm

33. Mechanisms underlying assimilation: data
Restrict the analysis to a particular quarter: 2nd quarter
Each individual is randomly assigned to a reference week. We define her labor situation during that quarter depending on what she is doing during the reference week and we follow this individual two years (alternatively all their labour history).
If the individual has more than one job during the reference week we choose among all of them:
the permanent one
If several are permanent (or all are temporal)
the longer during the month corresponding to the reference week in the quarter
If several are permanent (all are temporal) and have the same length during the month
the one that begins earlier
If several are permanent (or all are temporal) and have the same length during the month, and they begins at the same date
the one that finishes later

34. Mechanisms underlying assimilation
Around 80% of the differential wage growth of immigrants is attributed to human capital accumulation (mostly used within the same firm).
Around 20% is explained by higher mobility of migrants.

35. Conclusions
The results do show some assimilation over the time spent in Spain: the first 5 years of experience in Spain reduced the wage differential by 14 pp. and the following 5 an additional 6pp.
Change in immigrant cohort of entry and selective emigration
Higher education level in the recent immigrants entry cohorts
Higher no renewal rates for those nationalities better educated
Mechanisms underlying assimilation: human capital accumulation appears to be the most important determinant in increasing wages (mostly occurring within the firm). Mobility across regions also plays a role although it is much smaller.

36. THANK YOU VERY MUCH!!!

37. Results

39. Mechanism underlying assimilation: data
Organization of the data set:
At each point in time we observe the characteristics of the worker: type of contract, days worked in the month of the reference week, sector of activity, company, province of working place, etc.
We compute the daily wage as the sum of total contributed earnings over total days worked in the month of the reference week.
All the previous information joined with personal characteristics gives us a very good characterization of the labor history for each individual in the sample.

40. Mechanism underlying assimilation.

41. Mechanism underlying assimilation
To estimate a probability model to understand the mechanism underlying assimilation

42. Mechanism underlying assimilation

43. Mechanism underlying assimilation

44. Mechanism underlying assimilation