In this dissertation, I examine immigrants’ integration into host societies by examining systematic patterns in the U.S. labor market. In the first two chapters, I study how differences in language and culture explain the formation of small business by highly educated immigrants and what implications that have for firms trying to identify the most productive workers in an increasingly global labor force; in the last chapter, I study another aspect of social bias by exploring how the September 11 terrorist attacks shaped labor market outcomes for subgroups of the immigrant population.
In Chapter 1, I show that linguistic-cultural backgrounds of immigrants can lead to a systematic misallocation of scarce talent: highly educated, foreign-born workers more likely sort out of salaried work, and into self-employment, than otherwise similar U.S.-born individuals. This differential sorting can be theoretically understood as a rational, but flawed, response to the difficulties of credibly signaling capabilities—the cultural distance between the employer and the candidate generates noisy signals, when precise signaling is more critical for applicants to more demanding jobs. Using surveys representative of the U.S. population and measuring cultural mismatch with “linguistic distance”, I find evidence consistent with this theory: not only the highly educated—who apply to more demanding jobs—but also the linguistically distant—who send noisier signals of ability—disproportionately sort into self-employment; immigrants who have culturally assimilated or who are surrounded by co-ethnics are less likely to exhibit such pattern. Furthermore, I show that immigrants’ English language deficit, among other potential drivers, does not, in and of itself, explain the differential sorting. This suggests that the systematic sorting pattern appears to reflect inefficient allocation of talent.
In Chapter 2, I further discuss the implications of findings from Chapter 1. My empirical analyses suggest an important role for cultural frictions in the labor market and therefore, inability for firms to correctly identify the productive workers. Awareness of the phenomenon can, in principle, allow firms to better harness the untapped talent pool of highly educated immigrants sorting into self-employment—the hidden gems. I provide suggestions for how firms should adjust their hiring practices as well as estimate for how much firms may be able to benefit by solving the hidden gems problem.
In Chapter 3, I examine how discrimination arising from preferences manifests itself in labor market outcomes across different minority groups over time. I exploit an exogenous shock in taste-based bias towards a subset of the immigrant group arising from the September 11 terrorist attacks: individuals who may appear to be Middle Eastern. By using a difference-in-differences approach based on a worker panel data, I provide suggestive evidence confirming previous studies, finding a negative effect of 9/11 on immigrants’ labor market outcomes. My results further suggest that there may potentially be heterogeneous effects associated with educational attainment, where the less well educated are increasingly worse off relative to the more educated. I partly ascribe this to the heterogeneous effect of occupational discrimination, where the less well educated increasingly sort into less complex jobs over time. I discuss alternative channels that may drive my results.
While I study labor market imperfections in the context of immigrant workers in the U.S., the findings of my studies can be applied more broadly to better understand how social biases affect economic outcomes of minority groups. Given that there are particularly pronounced social divides between an immigrant and a non-immigrant, studying the experiences of immigrants provide a unique vantage point to examine the effect of labor market discrimination. I hope to contribute to expanding our understanding for how social factors such as language, culture and preferences importantly drive matching of workers to firms in the labor market, generating systematic and persistent patterns of occupational segregation.
