Does host-country education mitigate immigrant inefficiency? Evidence from earnings of Australian university graduates

摘要

Imperfect transferability of skills remains a dominant argument in explaining lower earnings of immigrants. Acquisition of host-country education plays a critical role in overcoming this disadvantage. Using a stochastic frontier approach to compare earnings of native and foreign-born graduates from Australian universities, the authors evaluate the importance of host-country education in reducing earnings inefficiency of immigrants. Although immigrants are found to be initially more inefficient than natives, they assimilate toward the earnings frontier over time. Substantial variation in inefficiency and assimilation patterns exists across immigrants with differing residency status and ethnicity. Non-English background increases inefficiency for immigrants, but more so for permanent residents. Consistent with the tightening of selection criteria in Australia, recent immigrant cohorts are found to be more efficient.