Network Effects, Ethnic Capital and Immigrants' Earnings Assimilation : Evidence from a Spatial, Hausman-Taylor Estimation

Do ethnic enclaves assist or hinder immigrants in their economic integration? In this paper we examine the effect of 'ethnic capital' (e.g. ethnic network and ethnic concentration) on immigrants' earnings assimilation. We adopt a "spatial autoregressive network approach" to construct a dynamic network variable from micro-panel-data to capture the effects of spatial-ethnic-specific resource networks for immigrants. The spatial lag structure is combined with a Hausman-Taylor (1981) panel data model, which allows for some endogeneity. We examine the effects of ethnic capital and human capital using an eight-year Australian panel data set (HILDA). Results show that immigrants' labor market integration is significantly affected by the local concentration and resources of their ethnic group