Does host-country education mitigate immigrant inefficiency? Evidence from earnings of Australian university graduates

Article
First Online:
Received:
Accepted:
  • 41 Downloads

Abstract

Imperfect transferability of skills remains a dominant argument in explaining lower earnings of immigrants. Acquisition of host-country education plays a critical role in overcoming this disadvantage. Using a stochastic frontier approach to compare earnings of native and foreign-born graduates from Australian universities, the authors evaluate the importance of host-country education in reducing earnings inefficiency of immigrants. Although immigrants are found to be initially more inefficient than natives, they assimilate toward the earnings frontier over time. Substantial variation in inefficiency and assimilation patterns exists across immigrants with differing residency status and ethnicity. Non-English background increases inefficiency for immigrants, but more so for permanent residents. Consistent with the tightening of selection criteria in Australia, recent immigrant cohorts are found to be more efficient.

Keywords

Immigrants Assimilation Higher education Stochastic frontier 

JEL Classification

I24 J15 J31 
This is a preview of subscription content, log in to check access.

References

  1. Abedullah SK, Qaim M (2015) Bt cotton, pesticide use and environmental efficiency in Pakistan. J Agric Econ 66(1):66–86CrossRefGoogle Scholar
  2. Aigner D, Lovell CAK, Schmidt P (1977) Formulation and estimation of stochastic frontier production function models. J Econom 6:21–37CrossRefGoogle Scholar
  3. Akresh IL (2006) Occupational mobility among legal immigrants to the United States. Int Migr Rev 40:854–85CrossRefGoogle Scholar
  4. Battese GE, Coelli TJ (1995) A model for technical inefficiency effects in a stochastic frontier production function for panel data. Empir Econ 20:325–332CrossRefGoogle Scholar
  5. Berman E, Lang K, Siniver E (2003) Language-skill complementarity: returns to immigrant language acquisition. Labor Econ 10:265–290CrossRefGoogle Scholar
  6. Bishop J, Grodner A, Liu H (2007) Gender earnings differentials in Taiwan: a stochastic frontier approach. J Asian Econ 18:934–945CrossRefGoogle Scholar
  7. Borjas GJ (1994) The economics of immigration. J Econ Lit 32:1667–1717Google Scholar
  8. Bottasso A, Sembenelli A (2004) Does ownership affect firms’ efficiency? Panel data evidence on Italy. Empir Econ 29:769–786CrossRefGoogle Scholar
  9. Carliner G (2000) The language ability of US immigrants: assimilation and cohort effects. Int Migr Rev 34:158–182CrossRefGoogle Scholar
  10. Caudill SB, Ford JM (1993) Biases in frontier estimation due to heteroscedasticity. Econ Lett 41:17–20CrossRefGoogle Scholar
  11. Caudill SB, Ford JM, Gropper DM (1995) Frontier estimation and firm-specific inefficiency measures in the presence of heteroscedasticity. J Bus Econ Stat 13:105–111Google Scholar
  12. Carroll D, Tani M (2013) Over-education of recent higher education graduates: New Australian panel evidence. Econ Educ Rev 32:207–218CrossRefGoogle Scholar
  13. Chiswick BR, Lee YL, Miller PW (2004) Immigrants’ language skills: the Australian experience in a longitudinal survey. Int Migr Rev 38:611–54CrossRefGoogle Scholar
  14. Chiswick BR, Miller PW (1995) The endogeneity between language and earnings: international analyses. J Labor Econ 13:246–288CrossRefGoogle Scholar
  15. Cobb-Clark D (2003) Public policy and the labor market adjustment of new immigrants to Australia. J Popul Econ 16:655–681CrossRefGoogle Scholar
  16. Coelli TJ (1995) Estimators and hypothesis tests for a stochastic frontier function: a Monte Carlo analysis. J Product Anal 6:247–268CrossRefGoogle Scholar
  17. Daneshvary N, Herzog HW Jr, Hofler RA, Schlottmann AM (1992) Job search and immigrant assimilation: an earnings frontier approach. Rev Econ Stat 74:482–492CrossRefGoogle Scholar
  18. Dustmann C, van Soest A (2002) Language and the earnings of immigrants. Ind Labor Relat Rev 55:473–492CrossRefGoogle Scholar
  19. Friedberg R (2000) You can’t take it with you? Immigrant assimilation and the portability of human capital. J Labor Econ 18(2):221–251CrossRefGoogle Scholar
  20. Gregory R, Borland J (1999) Recent developments in public sector labor market. In: Ashenfelter O, Layard R (eds) Handbook of labor economics. North Holland, AmsterdamGoogle Scholar
  21. Guthrie B, Johnson TJ (1997) Study of non-response to the 1996 Graduate Destination Survey. Department of Employment, Education, Training and Youth Affairs, CanberraGoogle Scholar
  22. Hadri K (1999) Estimation of a doubly heteroscedastic stochastic cost frontier. J Bus Econ Stat 17:359–363Google Scholar
  23. Hawthorne L (2011) Competing for skills: migration policies and trends in New Zealand and Australia. Executive summary for international migration, settlement and employment dynamics. Department of Labor, New ZealandGoogle Scholar
  24. Huang C, Liu JT (1994) Estimation of a non-neutral stochastic frontier production function. J Prod Anal 5:171–180CrossRefGoogle Scholar
  25. Kumbhakar SC, Ghosh S, McGuckin JT (1991) A generalized production frontier approach for estimating determinants of inefficiency in US dairy farms. J Bus Econ Stat 9:279–286Google Scholar
  26. Kumbhakar SC, Lovell CAK (2000) Stochastic frontier analysis. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  27. Kumbhakar SC, Wang HJ, Horncastle AP (2015) A practitioner’s guide to stochastic frontier analysis using stata. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  28. Loh ES (1996) Productivity differences and the marriage wage premium for white males. J Hum Resour 31:566–589CrossRefGoogle Scholar
  29. McDonald JT, Worswick C (1999) The earnings of immigrant men in Australia: assimilation, cohort effects and macroeconomic conditions. Econ Rec 75:49–62CrossRefGoogle Scholar
  30. Meeusen W, van den Broeck J (1977) Efficiency estimation from Cobb–Douglas production functions with composed error. Int Econ Rev 18:435–444CrossRefGoogle Scholar
  31. Nielsen HS, Rosholm M, Smith N, Husted L (2004) Qualifications, discrimination or assimilation? An extended framework for analyzing immigrant wage gaps. Empir Econ 29:855–883CrossRefGoogle Scholar
  32. Pitt MM, Lee M-F (1981) The measurement and sources of technical inefficiency in the Indonesian weaving industry. J Dev Econ 9:43–64CrossRefGoogle Scholar
  33. Polachek SW, Robst J (1998) Employee labor market information: comparing direct world of work measures of workers’ knowledge to stochastic frontier estimates. Labor Econ 5:231–242CrossRefGoogle Scholar
  34. Reagan PB, Olsen RJ (2000) You can go home again: evidence from longitudinal data. Demography 37:339–350CrossRefGoogle Scholar
  35. Reifschneider D, Stevenson R (1991) Systematic departures from the frontier: a framework for the analysis of firm inefficiency. Int Econ Rev 32:715–723CrossRefGoogle Scholar
  36. Robinson MD, Wunnava PV (1989) Measuring direct discrimination in labor markets using a frontier approach: evidence from CPS female earnings data. South Econ J 56:212–218CrossRefGoogle Scholar
  37. Slottje DJ, Hirschberg JG, Hayes KJ, Scully GW (1994) A new method for detecting individual and group labor market discrimination. J Econom 61:43–64CrossRefGoogle Scholar
  38. Wang HJ (2002) Heteroscedasticity and non-monotonic efficiency effects of a stochastic frontier model. J Prod Anal 18(3):241–253CrossRefGoogle Scholar
  39. Wang HJ (2003) A stochastic frontier analysis of financing constraints on investment: the case of financial liberalization in Taiwan. J Bus Econ Stat 21(3):406–419CrossRefGoogle Scholar
  40. Wang HJ, Schmidt P (2002) One-step and two-step estimation of the effects of exogenous variables on technical efficiency levels. J Prod Anal 18:129–144CrossRefGoogle Scholar
  41. Yaisawarng S, Asavadacgabukorn P, Yaisawarng S (2014) Efficiency and productivity in the Thai non-life insurance industry. J Prod Anal 41:291–306CrossRefGoogle Scholar
  42. Yu WY (2000) Immigrant earnings assimilation: estimates from longitudinal data. Am Econ Rev 90:368–72CrossRefGoogle Scholar
  43. Zeng Z, Xie Y (2004) Asian-Americans’ earnings disadvantage reexamined: the role of place of education. Am J Sociol 109(5):1075–1108CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2017

Authors and Affiliations

  1. 1.School of Economics and FinanceQueensland University of TechnologyBrisbaneAustralia
  2. 2.Department of Economics and FinanceUniversity of DaytonDaytonUSA

Personalised recommendations