What explains immigrant-native gaps in European labor markets: The role of institutions

Abstract

The understanding of how institutional and policy contexts affect immigrant integration is essential for any effort to foster a sustainable and effective migration and integration policy framework. Immigrant-native labor market gaps may arise due to differences in human capital or other socio-economic and demographic characteristics, but also due to differentiated impacts of institutions and policies on otherwise similar immigrants and natives. Different integration policy approaches are needed to close the gaps arising through these different mechanisms. This paper exploits the variation across Europe to study the institutional and policy determinants of immigrant-native gaps in host labor markets. Using the EU Labor Source Survey as the primary source of data and a novel analytical approach we study immigrant-native gaps in labor force participation, unemployment, low-skilled employment and temporary employment and measure the contribution of institutional and policy contexts to the part of these gaps that cannot be explained by immigrant-native differences in characteristics. Our findings confirm that institutional and policy contexts play a significant role in immigrant integration, and highlight the importance of tailoring policy approaches with regard to the causes of immigrant-native gaps.