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Legal Status at Entry, Economic Performance, and Self-Employment Proclivity: A Bi-National Study of Immigrants

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  • Amelie Constant
  • Klaus F. Zimmermann

Abstract

There are concerns about the attachment of immigrants to the labor force, and the potential policy responses. This paper uses a bi-national survey on immigrant performance to investigate the sorting of individuals into full-time paid-employment and entrepreneurship and their economic success. Particular attention is paid to the role of legal status at entry in the host country (worker, refugee, and family reunification), ethnic networks, enclaves and other differences among ethnicities for their integration in the labor market. Since the focus is on the understanding of the self-employment decision, a two-stage structural probit model is employed that determines the willingness to work full-time (against part-time employment and not working), and the choice between full-time paid work and self-employment. The choices are determined by the reservation wage for full-time work, and the perceived earnings from working in paid-employment and as entrepreneur, among other factors. Accounting for sample selectivity, the paper provides regressions explaining reservation wages, and actual earnings for paid-employment and self-employment, which provide the basis for such an analysis. The structural probit models suggest that the expected earnings differentials from working and reservation wages and for self-employment and paid-employment earnings matter much, although only among a number of other determinants. For Germany, legal status at entry is important; former refugees and those migrants who arrive through family reunification are less likely to work full-time; refugees are also less self-employed. Those who came through the employment channel are more likely to be in full-time paid work. In Denmark, however, the status at entry variables do not play any significant role. This suggests that the Danish immigrant selection system is ineffective.

Suggested Citation

  • Amelie Constant & Klaus F. Zimmermann, 2006. "Legal Status at Entry, Economic Performance, and Self-Employment Proclivity: A Bi-National Study of Immigrants," Discussion Papers of DIW Berlin 547, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp547
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    References listed on IDEAS

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    1. Bauer, Thomas K. & Lofstrom, Magnus & Zimmermann, Klaus F., 2000. "Immigration Policy, Assimilation of Immigrants and Natives' Sentiments towards Immigrants: Evidence from 12 OECD-Countries," IZA Discussion Papers 187, Institute of Labor Economics (IZA).
    2. Constant, Amelie & Zimmermann, Klaus F., 2005. "Immigrant Performance and Selective Immigration Policy: A European Perspective," National Institute Economic Review, Cambridge University Press, vol. 194, pages 94-105, October.
    3. Veall, Michael R & Zimmermann, Klaus F, 1996. "Pseudo-R-[superscript 2] Measures for Some Common Limited Dependent Variable Models," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 241-259, September.
    4. 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.
    5. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-266, May.
    6. Timothy J. Hatton, 2004. "Seeking asylum in Europe [‘Violence against citizens in civil wars: looting or terror?’]," Economic Policy, CEPR;CES;MSH, vol. 19(38), pages 6-62.
    7. Clark, Kenneth & Drinkwater, Stephen, 1998. "Ethnicity and Self-Employment in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(3), pages 383-407, August.
    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. Zimmermann, Klaus F. (ed.), 2005. "European Migration: What Do We Know?," OUP Catalogue, Oxford University Press, number 9780199257355, November.
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    Cited by:

    1. Corrado Giulietti & Guangjie Ning & Klaus F. Zimmermann, 2012. "Self-employment of rural-to-urban migrants in China," International Journal of Manpower, Emerald Group Publishing, vol. 33(1), pages 96-117, March.
    2. Lens Dries & Marx Ive & Vujić Sunčica, 2019. "Double Jeopardy: How Refugees Fare in One European Labor Market," IZA Journal of Development and Migration, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-29, June.
    3. Amelie F. Constant & Annabelle Krause & Ulf Rinne & Klaus F. Zimmermann, 2017. "Reservation wages of first- and second-generation migrants," Applied Economics Letters, Taylor & Francis Journals, vol. 24(13), pages 945-949, July.
    4. Stuart Campbell, 2014. "Does it matter why immigrants came here? Original motives, the labour market, and national identity in the UK," DoQSS Working Papers 14-14, Quantitative Social Science - UCL Social Research Institute, University College London.
    5. Battisti, Michele & Giesing, Yvonne & Laurentsyeva, Nadzeya, 2019. "Can job search assistance improve the labour market integration of refugees? Evidence from a field experiment," Labour Economics, Elsevier, vol. 61(C).
    6. Isabel Ruiz & Carlos Vargas-Silva, 2018. "Differences in labour market outcomes between natives, refugees and other migrants in the UK," Journal of Economic Geography, Oxford University Press, vol. 18(4), pages 855-885.
    7. Giesing, Yvonne & Battisti, Michele & Laurentsyeva, Nadzeya, 2018. "The Labour Market Integration of Refugees in Germany: Evidence from a Field Experiment," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181522, Verein für Socialpolitik / German Economic Association.
    8. Constant, Amelie F. & Gataullina, Liliya & Zimmermann, Klaus F., 2009. "Ethnosizing immigrants," Journal of Economic Behavior & Organization, Elsevier, vol. 69(3), pages 274-287, March.
    9. Klaus F. Zimmermann & Amelie F. Constant & Liliya Gataullina, 2009. "Naturalization proclivities, ethnicity and integration," International Journal of Manpower, Emerald Group Publishing, vol. 30(1/2), pages 70-82, March.
    10. Stefan Jestl & Michael Landesmann & Sebastian Leitner & Barbara Wanek-Zajic, 2022. "Trajectories of Employment Gaps of Refugees and Other Migrants: Evidence from Austria," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 41(2), pages 609-669, April.
    11. Guzi, Martin & Kahanec, Martin & Kureková, Lucia Mýtna, 2015. "What Explains Immigrant-Native Gaps in European Labor Markets: The Role of Institutions," IZA Discussion Papers 8847, Institute of Labor Economics (IZA).
    12. Brenner, Jan, 2010. "Life-cycle variations in the association between current and lifetime earnings: Evidence for German natives and guest workers," Labour Economics, Elsevier, vol. 17(2), pages 392-406, April.
    13. Jonas Helgertz & Pieter Bevelander & Anna Tegunimataka, 2014. "Naturalization and Earnings: A Denmark–Sweden Comparison," European Journal of Population, Springer;European Association for Population Studies, vol. 30(3), pages 337-359, August.
    14. Núria Rodríguez-Planas & Raquel Vegas, 2011. "Moroccans’ Assimilation in Spain: Family-Based Versus Labor-Based Migration," Middle East Development Journal, Taylor & Francis Journals, vol. 3(2), pages 119-139, January.
    15. Jan Brenner, 2009. "Life-Cycle Variations in the Association between Current and Lifetime Earnings – Evidence for German Natives and Guest Workers," Ruhr Economic Papers 0095, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    16. Cahit Guven & Lan Anh Tong & Mutlu Yuksel, 2020. "Australia's Immigration Selection System and Labour Market Outcomes in a Family Context: Evidence from Administrative Data," The Economic Record, The Economic Society of Australia, vol. 96(S1), pages 50-77, June.
    17. Abdurrahman Aydemir, 2013. "Skill-based immigrant selection and labor market outcomes by visa category," Chapters, in: Amelie F. Constant & Klaus F. Zimmermann (ed.), International Handbook on the Economics of Migration, chapter 23, pages 432-452, Edward Elgar Publishing.
    18. repec:zbw:rwirep:0095 is not listed on IDEAS
    19. Peter Huber, 2015. "What Institutions Help Immigrants Integrate? WWWforEurope Working Paper No. 77," WIFO Studies, WIFO, number 57884, June.
    20. Zovanga L. Kone & Isabel Ruiz & Carlos Vargas-Silva, 2021. "Self-employment and reason for migration: are those who migrate for asylum different from other migrants?," Small Business Economics, Springer, vol. 56(3), pages 947-962, February.

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    More about this item

    Keywords

    Self-employment; Entrepreneurship; Ethnicity; Migration; Asylum seekers; Refugees; Migrant workers; Family reunification; Citizenship; Discrimination;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition

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