Are Immigrants' Earnings Influenced by the Characteristics of Their Neighbours?

Differences in immigrant economic trajectories have been attributed to a wide variety of factors. One of these is the local spatial context where immigrants reside. This spatial context assumes special salience in light of expanding public exposure to and scholarly interest in the potential impacts of spatial concentrations of immigrants. A crucial question is whether immigrants' opportunities are influenced by their neighbours. In this paper we contribute statistical evidence relevant to answering this vital question. We develop multiple measures of the spatial context in which immigrants reside and assess their contribution to the average earnings of immigrant individuals in the three large Swedish metropolitan areas, controlling for individual and regional labour-market characteristics. We use unusually rich longitudinal information about Swedish immigrants during the 1995–2002 period. We find evidence that immigrant men and women paid a substantial penalty during 1999–2002 if in 1999 they resided in areas where a substantial number of their neighbours were members of the same ethnic group. The evidence suggests that own-group concentrations can initially pay dividends for immigrants, but these benefits quickly turn into net disadvantages over time.