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Labor Market Assimilation and the Self-Employment Decision of Immigrant Entrepreneurs

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  • Lofstrom, Magnus

    ()
    (Public Policy Institute of California)

Abstract

This paper uses data from the 1980 and 1990 U.S. Censuses to study labor market assimilation of self-employed immigrants. Separate earnings functions for the self-employed and wage/salary workers are estimated. To control for endogenous sorting into the sectors, models of the self-employment decision are estimated. Variables for the proportion of immigrants in the population and average earnings ratios are used as instruments to control for self-selection into self-employment and consequently identify the inverse Mills correction term in the earnings models. Self-employed immigrants do substantially better in the labor market than wage/salary immigrants. Earnings of self-employed immigrants are predicted to converge with natives’ wage/salary earnings at about age 30 and natives’ self-employed earnings at about age 40. Including the self-employed in the sample reduces the immigrant-native earnings gap by, on average, roughly 14 percent.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 54.

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Length: 56 pages
Date of creation: Aug 1999
Date of revision:
Publication status: published in: Journal of Population Economics, 2002, 15 (1), 83-114
Handle: RePEc:iza:izadps:dp54

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Keywords: self-employment; assimilation; Immigration;

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  1. Carliner, Geoffrey, 1980. "Wages, Earnings and Hours of First, Second, and Third Generation American Males," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 87-102, January.
  2. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-53, September.
  3. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 485-506.
  4. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
  5. Borjas, George J, 1985. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 463-89, October.
  6. George J. Borjas & Stephen G. Bronars, 1990. "Immigration and the Family," NBER Working Papers 3509, National Bureau of Economic Research, Inc.
  7. Robert W. Fairlie & Bruce D. Meyer, 1996. "Ethnic and Racial Self-Employment Differences and Possible Explanations," Journal of Human Resources, University of Wisconsin Press, vol. 31(4), pages 757-793.
  8. Andrew M. Yuengert, 1995. "Testing Hypotheses of Immigrant Self-Employment," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 194-204.
  9. Julian R. Betts & Magnus Lofstrom, 2000. "The Educational Attainment of Immigrants: Trends and Implications," NBER Chapters, in: Issues in the Economics of Immigration, pages 51-116 National Bureau of Economic Research, Inc.
  10. Robert W. Fairlie & Bruce D. Meyer, 1994. "The Ethnic and Racial Character of Self-Employment," NBER Working Papers 4791, National Bureau of Economic Research, Inc.
  11. George J. Borjas & Stephen G. Bronars, 1988. "Consumer Discrimination and Self-Employment," NBER Working Papers 2627, National Bureau of Economic Research, Inc.
  12. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  13. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," NBER Working Papers 1942, National Bureau of Economic Research, Inc.
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