Explaining differences in labour market outcomes between natives and immigrants in a European institutional context

Abstract: In most European countries today, immigrants are doing worse than their native counterparts on the labour market, resulting in economically and socially undesirable outcomes. This thesis studies differences in labour market segregation for immigrants among European countries and explains how different institutional factors on the labour markets of Europe affect labour market segregation. More precisely, unemployment segregation and activity rate segregation is analyzed using a theoretical framework founded in previous research on the matter as well as prevalent labour market theory. This thesis uses statistical analyses at the aggregated level, as well as at the multi-level of micro and macro data, to compare four potential explanatory variables of activity rate gaps and unemployment rate gaps. These four variables are the share of immigrants with low education, the degree of union influence, the degree of wage compression and the degree of redistributive welfare schemes. The activity rate gap is found to be larger in countries with a high degree of redistributive welfare schemes. This segregating effect is found to be stronger for women than for men and to disappear for immigrants who are members of a union. The unemployment rate gap is also found to be larger in countries with a high degree of redistributive welfare schemes, but is also highly affected by the degree of influence from unions. This segregating effect is again found to disappear for immigrants who are members of a union, and in contrast to the activity rate gap, being female does not additionally increase the likelihood of being unemployed for immigrants. All explanatory variables have value in some specification but the share of immigrants with low education seems to be irrelevant in determining labour market segregation.