The Role of Source- and Host-Country Characteristics in ... - CReAM

While estimates of models (2) and (3) provide insights into the role of a given set of
source- and host-country characteristics, respectively, in immigrant women’s labor supply,
they do not acknowledge that the interplay between both might also affect individual
behavior. Specifically, one could argue that the higher the cultural difference, i.e., the
higher the dissimilarity in the beliefs and attitudes regarding working women between
an immigrant’s source and host country, the more difficult it is to adapt to the labor
market behavior of natives. In order to test this hypothesis, we estimate model (1) by
now additionally including the difference in FLFP rates between the source and the host
country – (F LF P R j − F LF P R k ) – which serves as our proxy for the cultural difference
between the two countries:
J
lfp ijk = Φ(x ′ i β + ∑ K∑
δ j c s j + γ k c h k + ρ(F LF P R j − F LF P R k ) + p ′ jk λ + t′ i ϑ + ɛ ijk). (4)
j=2 k=2
In order to consistently estimate the parameters of equations (1) to (4), we specify the
probability that a certain individual participates in the labor market by the use of a
binary probit model, implying the assumption that ɛ ijk follows a normal distribution. 20 We
estimate marginal effects in all models. To address the problem of intraclass correlation in
standard errors of immigrants within source- and host-country groups, respectively, we
cluster standard errors at the source-country level (Model 2) and host-country level (Model
3), respectively. 21 We further use host-country population weights in all regressions, which
ensure that each country is represented in proportion to its actual population size.
4 Basic Results
The estimation results of Model (1) for first-generation (columns 2 and 3) and secondgeneration
(columns 4 and 5) immigrants are shown in Table 1. The results for the
individual and household controls are in line with previous evidence on female (immigrant)
labor supply. For both first- and second-generation immigrants, labor force participation
is significantly lower among older women (46 to 59) as compared to middle-aged women
(36 to 45 years). A further strong predictor of the labor supply of immigrant women is
their level of education, with those having completed tertiary education being significantly
more likely and those with only a primary school degree being significantly less likely
to participate in the labor market than those with a secondary school degree. While
20 Logit and linear probability models yielded similar results.
21 While estimating clustered standard errors is the standard solution to address the problem of withingroup
error correlation, the standard errors obtained by this method might still be downward biased if the
number of clusters is very small.(see,e.g., Angrist and Pischke, 2009) We therefore check the robustness of
our results by estimating a mixed effects logit model with crossed random effects (see Section ??).
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