  We consider the role of unobservables, such as differences in search
frictions, reservation wages, and productivities for the explanation of wage
differentials between migrants and natives. We disentangle these by estimating
an empirical general equilibrium search model with on-the-job search due to
Bontemps, Robin, and van den Berg (1999) on segments of the labour market
defined by occupation, age, and nationality using a large scale German
administrative dataset.
  The native-migrant wage differential is then decomposed into several parts,
and we focus especially on the component that we label "migrant effect", being
the difference in wage offers between natives and migrants in the same
occupation-age segment in firms of the same productivity. Counterfactual
decompositions of wage differentials allow us to identify and quantify their
drivers, thus explaining within a common framework what is often labelled the
unexplained wage gap.
