IZA-Institute for the Study of Labor This draft 10-09-2009

We analyze the dynamics of the employment assimilation of first-generation immigrant man in Sweden using a high quality panel data set. If there are significant differences between employment-status persistence (structural and spurious state dependence) of immigrants and natives, then the standard static assimilation model produces biased predictions for the labour market outcome of immigrants. We find significant persistence of the employment-status which differs between immigrants and natives, also across immigrant groups. The static assimilation model of employment-status overestimates (underestimates) the early (later) marginal assimilation rates and the assimilation process is 5-10 years shorter compared to the dynamic assimilation model. A similar analysis based on the degree of educational levels reveals that the persistence of employment-status is also differed among subgroups by education levels leading to different labour market outcomes