More than 600,000 Jews migrated from the Soviet Union to Israel between 1990 and 1994, and during the first two years the immigrants caused an increase of more that 10 percent in the Israeli labor force. The main purpose of this study is to investigate the assimilation process of the immigrants in a new labor market. The focus is the dynamics of the wage of the immigrants and its relation to human capital accumulation (language and training) and the search for an occupation and a job in the new home. This wage process will be compared to that of native Israelis, and the study will investigate the impact of the immigration on the labor market conditions of the natives. Both topics are of great importance for the US as well as for any other host country. Two different hypotheses related to the effects of labor supply on the earning growth of immigrants will be tested. The first approach is that the main source of the wage increase is due to the search process for an occupation and a job, which is based on a sequential job and occupation search model. In this model the market opportunities and the search strategy of the immigrants determine the observed employment patterns and earnings. Wage growth here is mainly due to transitions between jobs and occupations. The second approach claims that the main source of the wage increase is due to the accumulation of local human capital (general and specific) while the search process has a minor role. This model combines some aspects of the job and occupation search of the first model but extends the analysis for the accumulation of skills such as language, knowledge of local market conditions, and familiarity with new technology. The novelty of the models is that the transition process among jobs and occupations and earning growth are analyzed jointly. The models will be estimated using panel data. The study uses a unique panel of 1200 immigrants who arrived between 10/89 and 1/92 and were interviewed during the summer of 1992 and the summer of 1995. This survey provides a complete history of their labor market experience. The alternative hypotheses will be tested and the long run implications on assimilation and wage convergence will be studied using alternative intervention policies. The impact of the immigration wave of 1990-1992 on the native population will be studied using nationwide income surveys, classified by occupation. The main hypothesis is that the initial impact is to reduce the wages of unskilled natives. The impact on skilled natives will appear later as the immigrants acquire local skills. This is in contrast to US studies that attempted to identify the impact of immigration in narrow geographical areas. The sheer size of the current immigration wave and the high concentration in high skilled occupation enable macroeconomic effects to be identified.
