Empirical Essays on Wage Setting and Immigrant Labor Market Opportunities

Abstract: This thesis consists of three self-contained essays.Essay 1: This essay estimates wage assimilation among non-western immigrants in Sweden, controlling for selection into employment by including individual fixed effects. Furthermore, using matched employer-employee panel data covering the complete Swedish labor market, this essay decomposes wage catch-up into relative wage growth within and between workplaces and occupations. The results show that failing to control for selection into employment is likely to underestimate relative wage growth of immigrants, as early entrants in the labor market differ from later entrants along unobservable dimensions. Even after 30 years in the country, the group of non-western immigrants still earns substantially lower wages than natives. Wages catch up mainly within workplaces and occupations, suggesting that improved signals of productivity, rather than improved knowledge of job options, are of importance for the wage growth of non-western immigrants.Essay 2: Earlier research has shown that immigrant- and minority entrepreneurs have difficulties accessing capital through the formal financial markets. This essay studies what role immigrant employees within the local bank sector have for the probability of immigrants to run their own businesses. I use linked employer-employee data covering the whole Swedish labor market for the years 1987 to 2003 and utilize a nationwide refugee dispersal policy to get exogenous variation in the exposure to co-ethnic bank employees. Results suggest that there is a positive relation between co-ethnic bank employees and the probability of being self-employed. This effect is most pronounced for immigrants who arrived with low education, for males and for those residing in metropolitan regions. The effects are substantial and robust to a wide set of controls for labor market characteristics of the ethnic group at the local level. These results provide evidence of an ethnic component in the formal credit markets.Essay 3 (with Oskar Nordström Skans): This essay investigates the impact of a collective agreement stipulating a one shot increase in establishment-specific wage levels in a public-sector setting where wages otherwise are set according to individualized wage bargaining. The agreement stipulated that wages should increase in proportion to the number of low-paid females within each establishment. We find that actual wages among incumbents responded to the share of females with a wage below the stipulated threshold, conditional on the separate effects of the share of low wage earners, and the share of females. We find clear evidence of path-dependence in wages, covered workers remained on higher wage levels 4 years after the agreement took effect. The increase in wages resulted in a reduced probability of exit among young workers with relatively good grades and a lower frequency of new hires at the establishment level.