The Wage Premium of Naturalized Citizenship

Abstract

Abstract We examine the potential effect of naturalization on the U.S. immigrants’ earnings. We find the earning gap between naturalized citizens and noncitizens is positive over many years, with a tent shape across the wage distribution. We focus on a normalized metric entropy measure of the gap between distributions, and compare with conventional measures at the mean, median, and other quantiles. In addition, naturalized citizen earnings (at least) second-order stochastically dominate noncitizen earnings in many of the recent years. We construct two counterfactual distributions to further examine the potential sources of the earning gap, the “wage structure” effect and the “composition” effect. Both of these sources contribute to the gap, but the composition effect, while diminishing somewhat after 2005, accounts for about 3/4 of the gap. The unconditional quantile regression (based on the Recentered Influence Function), and conditional quantile regressions confirm that naturalized citizens have generally higher wages, although the gap varies for different income groups, and has a tent shape in many years.