published in: International Economic Review, 2008, 49 (3), 837-872
This paper analyzes the labor mobility and human capital accumulation of male immigrants
who moved from the former Soviet Union to Israel. We formulate an estimable dynamic
choice model for employment and training in blue and white-collar occupations, where the
labor market randomly offered opportunities are affected by past choices. The estimated
model well fits the observed patterns of the fast decrease in unemployment as immigrants
first find blue-collar jobs and attend training, followed by a gradual movement to white-collar
occupations. The estimated rates of return to local training, local experience and local
language are very high, but imported skills have zero (conditional) return. Furthermore, the
welfare gain from the impact of training on job offer probabilities is larger than it’s effect on
wages. Due to low job offer rates, the realized rate of return from white-collar training is
relatively low and takes time. As a result, the annual aggregate wage growth, due to the
availability of training programs, increases with time in Israel to 1.4 percent in the fifth year.
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