The earnings of immigrants and the quality adjustment of immigrant human capital

Mesbah Fathy Sharaf

doi:10.1186/2193-9039-2-13

Abstract

Abstract The quality dimension of immigrant human capital has received little attention in the economic assimilation literature. The objective of this paper is to demonstrate how human capital acquired in different source countries may be adjusted according to its quality in the Canadian labor market. This is achieved by deriving quality-adjustment indices using data from the 2001 Canadian census. These indices are then used to examine the role of schooling quality in explaining differential returns to schooling and over-education rates by country-of-origin. The key finding is that accounting for schooling quality virtually eliminates native-immigrant gaps in returns to schooling and the incidence of over-education. The quality of human capital is important for understanding the economic integration of immigrants. JEL Codes F22; I2; J15; J31

Highlights

Recent empirical evidence reveals that the quality of human capital plays an important role in accounting for differences in growth rates across countries (e.g. Hanushek and Kimko, 2000; Schoellman, 2012)
An important finding of this paper is that accounting for schooling quality virtually eliminates the native-immigrant gaps in the returns to schooling and the incidence of over-education. This implies that when human capital is measured by years of schooling alone, as is standard in the literature, some of the discrepancy in the labor market outcomes between immigrants and the native-born arise from differences in the quality of human capital between the host and home countries
The derived indices are used to explain the differential returns to schooling and overeducation rates by nativity

Summary

Introduction

Recent empirical evidence reveals that the quality of human capital plays an important role in accounting for differences in growth rates across countries (e.g. Hanushek and Kimko, 2000; Schoellman, 2012). The principal objective of this paper is an explicit derivation of quality adjustment indices which modify the human capital of immigrants acquired from different countries, using information on their earnings in the Canadian labor market. Returns to schooling and over-education The labor market performance of immigrants compared to the native-born has been the subject of intensive research (e.g. Galarneau and Morissette, 2004; Li et al, 2006; Green et al, 2007; Wald and Fang, 2008). The first is that foreignobtained schooling is discounted in the host country’s labor market This is reflected by a lower return to an immigrant’s education compared with the education of a corresponding native (see e.g. Chiswick, 1978; Baker and Benjamin, 1994; Friedberg, 2000; Alboim et al, 2005; Chiswick and Miller, 2008). The second regularity is that overeducation rate is, on average, higher among immigrants than it is among corresponding natives (see e.g. Li et al, 2006; Kler, 2007; Green et al, 2007; Galarneau and Morissette, 2008; Wald and Fang, 2008; Nielsen, 2011)

Objectives

Methods

Results

Conclusion