Determinants of immigrants earnings in the Italian labour market: the role of human capital and country of origin

Annalisa Donno, Università di Bologna
Rosella Rettaroli, Università di Bologna
Francesco Scalone, Università di Bologna

Studying immigration in the Italian labour market is a matter of great interest, as Italy has become in a relatively short period of time a country with significant migration flows in the international context. The aim of this work is to study the determinants of immigrants earning in the Italian labour market. We will focus on the role played by human capital, controlling for many socio-demographic characteristics, by using the Italian survey on “Income and living conditions of foreigners". We will study the determinants of immigrants wages by starting from the hypothesis that skills valuable in one labour market may not raise productivity in another labour market (Schmidt, 1997), and hence may not be rewarded equally in terms of earnings. Therefore we will test the hypothesis that returns to immigrants human capital vary not only for immigrants and natives, but also according to where the human capital has been obtained. According to our theoretical framework, human capital will be distinguished in two main specific components (education and working experience). Furthermore, we distinguish between human capital obtained in the country of origin and in Italy. By starting from the Friedberg (2000) model for the study of immigrant wages, we will use an OLS regression approach for the parameters estimation. Moreover we will take into account the possible existence of bias in sample selection, by means of the two-stage Heckman (1979) correction. We expect to find evidence for heterogeneity across immigrant groups, due to the cultural and socio-economic background distance across the immigrants countries of origin. In particular, we aim at assessing the importance of the cultural and socio-economic compatibility of the immigrants origin and destination countries for the transferability of human capital.