Neighbourhood Ethnic Composition and Employment Effects on Immigrant Incomes

Currently, in many Western countries there are concerns that clustering of ethnic minorities in certain parts of cities will negatively affect integration processes. However, scholarly theory and evidence on this point is mixed. We use Swedish data and conduct a panel analysis quantifying the degree to which the ethnic composition of the neighbourhood affects the subsequent labour income of individuals for the 1991 to 2006 period. We employ a fixed effects model to reduce the potential bias arising from unmeasured individual characteristics leading to neighbourhood selection. We also control for a range of individual demographic and socioeconomic attributes. Based on gender-stratified analyses of eight immigrant categories (N = 110,000) in three Swedish metropolitan areas, we find that male immigrants (females less so) gain if they reside in neighbourhoods with higher shares of co-ethnics and (under most circumstances) other immigrants, though the impact depends on neighbourhood level of employment and trajectory of ethnic share. This, we argue, should not be seen as an argument for ethnic residential segregation, but it tells us that the high degree of exclusion from the labour market experienced by many immigrants in Sweden is not directly caused by the level of immigrant residential segregation.