Earnings and Sectoral Choice of Low-Skill Afghan Workers in Iran: Evidence from Micro-Level Survey Data

Iran hosts the world's second largest Afghan population, consisting of both refugees and undocumented migrants. As a consequence, Afghans have an established presence in the labor markets of certain provinces in Iran that is likely to persist into the foreseeable future. Utilizing data from the ILO on establishments that employ both Afghan and Iranian labor, we test for earnings differentials between the two groups using a selection-bias correction model. This specification is proposed under the assumption that workers may be heterogenous with respect to the strength of their labor market contacts, which would have consequences for both the choice of sector and earnings upon employment. Under this specification, we find that while a raw wage gap exists between Iranian and Afghan workers engaged in similar work, measures of human capital explain away this differential, suggesting the absence of wage discrimination against Afghans in these markets. Keywords: Migration, Refugee Crisis, Wage discrimination, Sectoral Choice, Selection Bias, Afghanistan, Ira