Several studies, most of them employing straightforward regression analysis, have concluded that immigrants' proficiency in the language of their adopted country is correlated with their productivity, as measured by earnings. Two weaknesses of these studies are potential unobserved...

We use panel data from the German Socio-Economic Panel to estimate the determinants of language fluency of immigrants and its impact on earnings. Self reported measures of language proficiency contain substantial reporting errors. We specify a panel data model which takes explicit account of...