The Endogeneity between Language and Earnings: International Analyses

TLDR

The study examines how dominant language fluency influences earnings and the bidirectional relationship between language proficiency and income among immigrants. The authors test whether dominant language fluency depends on exposure, acquisition efficiency, and economic benefits, and whether earnings depend on language skills. They develop empirical counterparts to conceptual variables, estimate equations for Australia using OLS, IV, and sample‑selection bias techniques, and compare the results with analyses from the United States, Canada, and Israel.

Abstract

This study is concerned with the determinants of dominant language fluency, its effects on earnings, and its endogeneity with earnings among immigrants. Dominant language fluency is hypothesized to be a function of three fundamental variables: exposure to the language, efficiency in second language acquisition, and economic benefits from language fluency. Conceptual variables with empirical counterparts are developed. Earnings are hypothesized to be a function of language skills, among other variables. Ordinary least squares, instrumental variables, and sample selection bias techniques are used to estimate the equations for Australia. Comparisons are made with analyses for the United States, Canada, and Israel.