The Decomposition of Wage Inequalities Between Natives and Second Generation Immigrants Using a Non-Parametric Method: A Comparison Between France and the United States
The literature on wage inequalities between natives and second generation immigrants documents a relative absence of such inequalities in the United States and only slight ones in France. Meantime, second generation immigrants tend to be more in bad jobs (low wages, part-time, unsecure) than natives and have, in average, lower wages. A further look into the distribution provides insights about potential inequalities at some points of the distribution, which are masked when we look into average inequalities on the whole distribution.
Only a few empirical studies have been devoted to the distributional heterogeneity of wage inequalities between natives and second generation immigrants in France; the same is true in the United States, but to a lesser extent. Our paper proposes to compare the distributional analysis between the two countries. Our analysis relies on Nopo’s (2008) methodology, which deals with gender wage differences. Nopo proposes a nonparametric alternative to the Blinder-Oaxaca methodology that uses matching comparisons to explain these wage differences. This approach allows correcting for misspecification due to differences in the supports of the empirical distributions of individual characteristics for natives and second generation immigrants. It also highlights the problem of origin differences in the supports and provides information about the distribution of the unexplained pay differences. Based on his framework, we analyze the existing wage differences between natives and second generation immigrants in France and in the United States. Controlling for age, gender, diploma, parents’ occupation, some geographic and demographic characteristics, we are able to compute pairs of similar individuals except for their origin (natives vs. second generation immigrants) and decompose gaps in terms of explained and unexplained components.
The decomposition confirms first the concern about recognizing the origin-based differences in the supports in both countries, because second generation immigrants are not comparable to natives. Second, results suggest that an important share of the wage gap can be attributed to the fact that a substantial number of natives display some characteristics that second generation immigrants do not, and these characteristics are remunerated in the labor market. Besides, our analysis provides information on the distribution of unexplained pay differences. The average origin-based wage gap seems to be mainly driven by origin-based pay differences at the low deciles of the wages distributions in both countries.