Psychological Traits and Earnings Differentials among Men: A Study of Second‐generation Immigrants in Sweden*

The purpose of this study is to analyse the impact of psychological traits on earnings differentials between second‐generation immigrants and individuals with native‐born parents. The study is based on a cohort of men born in 1973 and residing in Sweden in 1990. In this paper, we use an indicator of psychological ability measured in connection with the military enlistment test in Sweden. The results show that the measure of psychological traits is an important determinant of earnings at the age of 30. Using an Oaxaca–Blinder decomposition, we find that earnings differentials between second‐generation immigrants and individuals with native‐born parents are explained, to a large degree, by differences in endowments of psychological traits.