Working Paper No. 1036

Explaining Cross-Country Differences in Labor Market Gaps between Immigrants and Natives in the OECD

Published: August 12, 2014Pages: 29Keywords: Labor market segregation; Immigration; Insider-outside hypothesisJEL-codes: J60; J71; J51; E24
Published version

Explaining Cross-Country Differences in Labor Market Gaps between Immigrants and Natives in the OECD Andreas Bergh


In most OECD-countries, immigrants have lower employment and higher unemployment than natives. This paper compares nine potential explanations of these gaps. Results are obtained for 21–28 countries using bivariate correlations, OLS-regressions and Bayesian model averaging over all 512 theoretically possible model specifications.

Two robust patterns are found. The unemployment gap is bigger in countries where collective bargaining agreements cover a larger share of the labor market. The employment gap is bigger in countries with more generous social safety nets. Five variables have explanatory value in some specifications: Xenophobia, employment protection laws, social expenditure, asylum applications, and the share of immigrants in the population. The education of immigrants and migrant integration policies have no explanatory value. A trade-off seems to exist such that countries with smaller labor market gaps have higher income inequality.

Andreas Bergh

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Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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