, Volume 44, Issue 4, pp 865-881

U.S. Immigrants’ labor market adjustment: Additional Human capital investment and Earnings Growth

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Abstract

New Immigrant Survey-Pilot data are used to address the long-standing debate over whether immigrants to the United States assimilate economically. Using panel data and an individual fixed-effect specification, I find evidence indicating rapid economic assimilation, on the order of an average increase in earnings of 12%–13% during the 12-month survey period. Results indicate partial support for Duleep and Regets’ Immigrant Human Capital Investment (IHCI) model, indicating an inverse relationship between initial earnings and earnings growth and showing some evidence of the expected interaction between skill transferability and skill level when predicting human capital investment decisions. Having more years of education, English proficiency, and lower earnings at the baseline are associated with a higher probability of enrolling in formal school in the United States. Overall, findings suggest substantial economic integration within the first year after establishing permanent residency.

I would like to thank Richard Akresh, Paul Allison, Ricardo Godoy, Darren Lubotsky, Douglas Massey, Herbert Smith, and the participants at the ILIR labor lunch at the University of Illinois for their feedback. I have also greatly benefited from the insightful and detailed comments of the editors, particularly with respect to the write-up of the IHCI model as well as the helpful comments of several anonymous reviewers. Any mistakes are my own.