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2. Mai 2013

SOEP Brown Bag Seminar

The Role of Language Skills in the German Labor Market


2. Mai 2013
12:30 - 13:30


DIW Berlin im Quartier 110
Room 5.2.010
Mohrenstraße 58
10117 Berlin


Mathias Sinning (Australian National University)

(joint with Ingo Isphording and Sebastian Otten)

This paper uses data from the German Socio-Economic Panel (SOEP) to study the effect of language skills on labor market outcomes. To address problems related to endogeneity and measurement error, we construct an instrumental variable based on differences in language acquisition profiles of immigrants across the distribution of linguistic distance between German and the language spoken in the country of origin. Our findings indicate that the effect of language skills on employment probabilities is insignificant, while the positive effect of language skills on wages may be attributed to the sorting of immigrants across occupations. Our results further indicate that OLS regressions systematically underestimate the returns to language skills in the German labor market.