Does citizenship matter? The economic impact of naturalizations in Germany

This paper analyses whether citizenship acquisition affects the labour market performance of immigrants in Germany. The study uses actual micro data from the employment sample of the Institute for Employment Research, which covers more than 80% of the entire labour force in Germany. The econometric analysis has been carried out using panel data techniques, which allow to disentangle the effects of self-selection and legal impact of citizenship acquisition. Estimates from a pooled OLS specification suggest the existence of a wage premium for naturalized immigrants of both genders. Fixed effects estimates for males show an increased wage growth in the years following naturalization, consistent with the argument that naturalization increases the labour market opportunities of immigrants. Results for female employees indicate that the wage premium of naturalized women is solely the result of a positive self-selection process.

► We analyse the effect of naturalization on wages of immigrants.
► The analysis makes use of a large, administrative data set from Germany.
► Initially, we find a wage premium for naturalized immigrants of both genders.
► For women, the wage premium seems to be solely due to positive self-selection.
► For males, we find that wage growth increases after citizenship acquisition.