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

  • Constant, Amelie F.


    (George Washington University, Temple University)

  • Zimmermann, Klaus F.


    (IZA and University of Bonn)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1910.

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Length: 41 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1910
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  1. 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 241-59, September.
  2. 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 for the Study of Labor (IZA).
  3. 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.
  4. Zimmermann, Klaus F. (ed.), 2005. "European Migration: What Do We Know?," OUP Catalogue, Oxford University Press, number 9780199257355.
  5. Timothy J. Hatton, 2004. "Seeking asylum in Europe," Economic Policy, CEPR;CES;MSH, vol. 19(38), pages 5-62, 04.
  6. 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 253-66, May.
  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.
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