Firm productivity and immigrant-native earnings disparity

Published: 08 December 2021

Author: Cristina Bratu, And Stefano Lombardi, And Anna Thoresson, And Olof Åslund, And

We study the role of firm productivity in explaining earnings disparities between immigrants and natives using population-wide matched employer-employee data from Sweden. We find substantial earnings returns to working in firms with higher persistent productivity, with greater gains for immigrants from non-Western countries. Moreover, the pass-through of within-firm productivity variation to earnings is stronger for immigrants in low-productive, immigrant-dense firms. But immigrant workers are underrepresented in high-productive firms and less likely to move up the productivity distribution. Thus, sorting into less productive firms decreases earnings in poor-performing immigrant groups that would gain the most from working in high-productive firms.

Keywords: Firm productivity; Immigrant-native earnings gaps; Wage inequality
JEL Codes: J15; J31; J62


IFAU working paper 2021:18 is written by Cristina Bratu (Aalto universitety), Stefano Lombardi (VATT, Helsinki), Anna Thoresson (IFAU) and Olof Åslund (IFAU and Uppsala university). For further information, please contact Olof Åslund: phone +46 (0) 18-471 5102 or e-mail