DP2012 Language and the Earnings of Immigrants

Author(s): Christian Dustmann, Arthur van Soest
Publication Date: November 1998
Keyword(s): endogeneity, International Migration, language
JEL(s): F22, J24
Programme Areas: Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2012

A number of studies have established a positive effect of migrants' language proficiency on their productivity. It has been argued that these estimates are upward-biased because of the presence of unobserved heterogeneity. To obtain an accurate estimate of language effects is important since it has potentially important implications for migration policies. Using panel data on immigrants in Germany, we show that in self-reported measures of language proficiency measurement error is substantial. Our results suggest that measurement error is a more serious problem than unobserved heterogeneity, and that Least Squares underestimates the effect of speaking fluency on earnings.