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The Effect of Immigration on Native Self-Employment

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  • Robert W. Fairlie
  • Bruce D. Meyer

Abstract

A rapidly growing literature examines the impact of immigrants on the labor market outcomes of native-born Americans. However, the impact of immigration on natives in self-employment has not been examined, despite the over-representation of immigrants in that sector. We first present a new general equilibrium model of self-employment and wage/salary work. For a range of plausible parameter values, the model predicts small negative effects of immigration on native self-employment rates and earnings. Using 1980 and 1990 Census microdata, we then examine the relationship between changes in immigration and native self-employment rates and earnings across 132 of the largest metro-politan areas in the United States. We find evidence supporting the hypothesis that self-employed immigrants displace self-employed natives. The effects are much larger than those predicted by simulations of the theoretical model. Immigrants, however, do not have a negative effect on native self-employment earnings. Our findings are similar if we weight immigration rates by the propensity of immigrant groups to be self-employed or if we try alternative estimation techniques and specifications.

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Paper provided by Institute for Policy Resarch at Northwestern University in its series IPR working papers with number 00-2.

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Handle: RePEc:wop:nwuipr:00-2

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  1. David A. Jaeger & Susanna Loeb & Sarah E. Turner & John Bound, 1998. "Coding Geographic Areas Across Census Years: Creating Consistent Definitions of Metropolitan Areas," NBER Working Papers 6772, National Bureau of Economic Research, Inc.
  2. 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.
  3. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
  4. George J. Borjas & Glenn T. Sueyoshi, 1993. "A Two-Stage Estimator for Probit Models with Structural Group Effects," NBER Technical Working Papers 0146, National Bureau of Economic Research, Inc.
  5. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  6. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," NBER Working Papers 1942, National Bureau of Economic Research, Inc.
  7. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 371-91, October.
  8. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-53, September.
  9. Andrew M. Yuengert, 1995. "Testing Hypotheses of Immigrant Self-Employment," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 194-204.
  10. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 485-506.
  11. Devine, Theresa J, 1994. "Changes in Wage-and-Salary Returns to Skill and the Recent Rise in Female Self-Employment," American Economic Review, American Economic Association, vol. 84(2), pages 108-13, May.
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Cited by:
  1. Bogan, Vicki & Darity Jr., William, 2008. "Culture and entrepreneurship? African American and immigrant self-employment in the United States," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(5), pages 1999-2019, October.
  2. Baez, Javier E., 2011. "Civil wars beyond their borders: The human capital and health consequences of hosting refugees," Journal of Development Economics, Elsevier, vol. 96(2), pages 391-408, November.
  3. Minniti, Maria & Lévesque, Moren, 2008. "Recent developments in the economics of entrepreneurship," Journal of Business Venturing, Elsevier, vol. 23(6), pages 603-612, November.
  4. Robert W. Fairlie & Christopher Woodruff, 2007. "Mexican Entrepreneurship: A Comparison of Self-Employment in Mexico and the United States," NBER Chapters, in: Mexican Immigration to the United States, pages 123-158 National Bureau of Economic Research, Inc.
  5. Saiz, Albert, 2006. "Immigration and Housing Rents in American Cities," IZA Discussion Papers 2189, Institute for the Study of Labor (IZA).
  6. Tengeh, Robertson Khan & Ballard, Harry & Slabbert, Andre, 2011. "A framework for acquiring the resources vital for the start-up of a business in South Africa:an African Immigrant’s Perspective," MPRA Paper 34211, University Library of Munich, Germany.
  7. Pylypchuk, Yuriy, 2009. "Effects of immigration on the health insurance status of natives," Journal of Health Economics, Elsevier, vol. 28(5), pages 1028-1037, September.
  8. Betz, William & Simpson, Nicole B., 2013. "The Effects of International Migration on the Well-Being of Native Populations in Europe," IZA Discussion Papers 7368, Institute for the Study of Labor (IZA).
  9. Constant, Amelie F. & Shachmurove, Yochanan, 2003. "Entrepreneurial Ventures and Wage Differentials Between Germans and Immigrants," IZA Discussion Papers 879, Institute for the Study of Labor (IZA).

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