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Low-Skilled Immigrant Entrepreneurship

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  • Lofstrom, Magnus

    ()
    (Public Policy Institute of California)

Abstract

More than half of the foreign born workforce in the U.S. have no schooling beyond high school and about 20 percent of the low-skilled workforce are immigrants. More than 10 percent of these low-skilled immigrants are self-employed. Utilizing longitudinal data from the 1996, 2001 and 2004 Survey of Income and Program Participation panels, this paper analyzes the returns to self-employment among low-skilled immigrants. We compare annual earnings and earnings growth of immigrant entrepreneurs to immigrants in wage/salary employment as well as native born business owners. We find that the returns to low-skilled self-employment among immigrants is higher than it is among natives but also that wage/salary employment is a more financially rewarding option for most low-skilled immigrants. An exception is immigrant men, who are found to have higher earnings growth than immigrants in wage/salary employment and are predicted to reach earnings parity after approximately 10 years in business. We also find that most of the 20 percent male native-immigrant earnings gap among low-skilled business owners can be explained primarily by differences in the ethnic composition. Low-skilled female foreign born entrepreneurs are found to have earnings roughly equal to those of self-employed native born women.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4560.

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Length: 39 pages
Date of creation: Nov 2009
Date of revision:
Publication status: published in: Review of Economics of the Household, 2011, 9 (1), 25-44
Handle: RePEc:iza:izadps:dp4560

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Keywords: self-employment; earnings; low-skill; immigrants; entrepreneurship;

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  1. Robert Fairlie, 2005. "Entrepreneurship and Earnings among Young Adults from Disadvantaged Families," Small Business Economics, Springer, Springer, vol. 25(3), pages 223-236, October.
  2. Lofstrom, Magnus & Wang, Chunbei, 2006. "Hispanic Self-Employment: A Dynamic Analysis of Business Ownership," IZA Discussion Papers 2101, Institute for the Study of Labor (IZA).
  3. Holtz-Eakin, Douglas & Rosen, Harvey S & Weathers, Robert, 2000. " Horatio Alger Meets the Mobility Tables," Small Business Economics, Springer, Springer, vol. 14(4), pages 243-74, June.
  4. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, American Economic Association, vol. 79(3), pages 519-35, June.
  5. Lofstrom, Magnus & Bates, Timothy, 2009. "Latina Entrepreneurship," IZA Discussion Papers 3997, Institute for the Study of Labor (IZA).
  6. Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-59, November.
  7. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(3), pages 604-631, June.
  8. Timothy Bates & Lisa Servon, 1998. "Microenterprise As An Exit Route From Poverty:* Recommendations For Programs And Policy Makers," Working Papers 98-17, Center for Economic Studies, U.S. Census Bureau.
  9. David G. Blanchflower, 2004. "Self-Employment: More may not be better," NBER Working Papers 10286, National Bureau of Economic Research, Inc.
  10. Magnus Lofstrom, 2002. "Labor market assimilation and the self-employment decision of immigrant entrepreneurs," Journal of Population Economics, Springer, Springer, vol. 15(1), pages 83-114.
  11. Lofstrom, Magnus, 2009. "Does Self-Employment Increase the Economic Well-Being of Low-Skilled Workers?," IZA Discussion Papers 4539, Institute for the Study of Labor (IZA).
  12. Scott Shane, 2009. "Why encouraging more people to become entrepreneurs is bad public policy," Small Business Economics, Springer, Springer, vol. 33(2), pages 141-149, August.
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