Workplace segregation and the labour market performance of immigrants

Abstract

This paper studies the effect of conational coworkers in an immigrant’s first job on subsequent labour market outcomes using German register data. I instrument for the conational share using idiosyncratic variation in firm hiring in the local labour market where the immigrant searches for work. A ten percentage point increase in the initial conational share lowers employment by around 3 percentage points in the long-run. Survey evidence suggests that a higher conational share leads to higher self-employment and unemployment, rather than re-migration. Furthermore, both differential host country-specific human capital accumulation and changes in job search outcomes contribute to the employment effect.