Relative Returns to Skills and Assimilation of Immigrants in Hong Kong

A simple formal model is presented to analyse intercensal changes in the relative earnings of immigrants. A number of factors are analysed, including a change in the relative observed quality of immigrants, a change in the relative prices of observed skills, and assimilation. The model is applied to 1981 and 1991 Hong Kong census data and shows that although there is economic assimilation in the narrow sense at an estimated rate of approximately 1.55 percent p.a., earnings of immigrants diverge from earnings of natives because their relative returns to schooling declined.