Language Fluency of Immigrants and Ethnic Concentration in Germany

Firat Yaman 1, Alexander Danzer1
1IAB, Germany, 2University of Texas, Austin, USA, 3Royal Holloway College, UK

The main difficulty in studies that investigate the effect of ethnic concentrations in neighborhoods on outcomes of immigrants has been to account for the self-selection of immigrants into high-concentration neighborhoods along unobservable characteristics. We analyse the impact of ethnic concentration on the language proficiency of immigrants by exploiting the fact that initial placement of immigrants who were recruited in the framework of the German guest-worker program was determined by the requesting firms and the federal labor administration instead of the workers. We find a small, but robust and significant effect of ethnic concentration on immigrants’ German skills. Simulation results of a choice model in which location and learning decisions are made simultaneously confirm the presence of the effect, but also suggest that immigrants with high learning costs move to high-concentration regions, so that even under the counterfactual scenario of equal distribution of immigrants across Germany the increase in the share of German-speakers would be negligible.

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