Ruhr Economic Papers

Ruhr Economic Papers #398

Returns to Local and Foreign Language Skills – Causal Evidence from Spain

by Ingo E. Isphording

RUB, 01/2013, 33 S./p., 8 Euro, ISBN 978-3-86788-453-2 DOI: 10.4419/86788453

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Abstract

This study examines the returns to foreign and local language skills of immigrants in
the Spanish labor market. Different sources of endogeneity are addressed by deriving
a set of novel instruments for language proficiency through a measure of linguistic
dissimilarity. Using cross-sectional data from the 2007 National Immigrant Survey of
Spain (NISS), returns to language skills are estimated separately for Spanish, English,
German and French proficiency. Foreign language proficiency produces high returns,
which appear to be mediated through the channel of occupational choice. The results
are discussed against the background of a severe foreign language skills shortage in the
Spanish economy. Immigrants may deal as a supplier of foreign language proficiency
in the short run. In contrast to most studies, I find no compelling evidence of a wage
premium for local language profiiency.

JEL-Classification: F22, J15, J24, J31

Keywords: Language skills; migration; human capital; linguistic distance; instrumental variable

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