Transferability of Human Capital and Immigrant Assimilation: An Analysis for Germany

Abstract This paper investigates the transferability of human capital from various countries to Germany and the contribution of imperfect human capital portability to the explanation of the immigrant‐native wage gap. Our results reveal that, overall, education and, in particular, labor market experience accumulated in the home countries of the immigrants receive significantly lower returns than human capital obtained in Germany. We further find evidence for heterogeneity in the returns to human capital of immigrants across countries. Finally, imperfect human capital transferability appears to be a major factor in explaining the wage differential between natives and immigrants.