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International labor migration, asymmetric information and occupational choice

  • Kar, Saibal

We study the effect of asymmetric information in the labor market of a country on the occupational choice pattern of immigrants vis-à-vis natives. The choice is limited to self-employment and paid employment. The study is motivated by empirical observations that regular and irregular immigrants in many countries are often over-represented in entrepreneurship/small business despite substantial initial disadvantages. There are also evidences that the immigrants catch up with the native income level within one and half decades of their presence in the foreign land. We try to identify the reasons and provide a formal explanation of how the initial disadvantage turns out to be a prospect in disguise. In particular, we show that a larger number of skilled workers from a mixed cohort of immigrants tend to take up riskier self-employment compared to skilled natives. This explains a higher average income with high temporal income variability for the immigrant group, with consequent implications for income convergence.

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File URL: http://mpra.ub.uni-muenchen.de/24106/1/MPRA_paper_24106.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24106.

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Date of creation: Apr 2009
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Publication status: Published in Trade and Development Review 1.2(2009): pp. 34-48
Handle: RePEc:pra:mprapa:24106
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  1. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  2. Kidd, M.P., 1990. "Immigrant Wage Differentials And The Role Of Self- Employment In Australia," Papers 1990-07, Tasmania - Department of Economics.
  3. Mark C. Regets & Harriet Orcutt Duleep, 1999. "Immigrants and Human-Capital Investment," American Economic Review, American Economic Association, vol. 89(2), pages 186-191, May.
  4. Chau, Nancy H & Stark, Oded, 1999. "Migration under Asymmetric Information and Human Capital Formation," Review of International Economics, Wiley Blackwell, vol. 7(3), pages 455-83, August.
  5. Edward Funkhouser & Stephen J. Trejo, 1995. "The labor market skills of recent male immigrants: Evidence from the Current Population Survey," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(4), pages 792-811, July.
  6. Robin Boadway & Nicolas Marceau & Maurice Marchand & Marianne Vigneault, 1998. "Entrepreneurship, Asymmetric Information, and Unemployment," International Tax and Public Finance, Springer, vol. 5(3), pages 307-327, July.
  7. Borjas, George J & Bronars, Stephen G, 1989. "Consumer Discrimination and Self-employment," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 581-605, June.
  8. Dustmann, Christian & Fabbri, Francesca, 2000. "Language Proficiency and Labour Market Performance of Immigrants in the UK," IZA Discussion Papers 156, Institute for the Study of Labor (IZA).
  9. 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.
  10. Andrew M. Yuengert, 1991. "Self-employment and the earnings of male immigrants in the U.S," Research Paper 9105, Federal Reserve Bank of New York.
  11. Robert J. LaLonde & Robert H. Topel, 1990. "The Assimilation of Immigrants in the U.S. Labor Markets," NBER Working Papers 3573, National Bureau of Economic Research, Inc.
  12. 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.
  13. Kar, Saibal & Saha, Bibhas, 2011. "Asymmetric Information in the Labor Market, Immigrants and Contract Menu," IZA Discussion Papers 5508, Institute for the Study of Labor (IZA).
  14. Duleep, Harriet Orcutt & Regets, Mark C., 1997. "The decline in immigrant entry earnings: Less transferable skills or lower ability?," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(Supplemen), pages 189-208.
  15. Andrew M. Yuengert, 1995. "Testing Hypotheses of Immigrant Self-Employment," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 194-204.
  16. Katz, Eliakim & Stark, Oded, 1987. "International Migration under Asymmetric Information," Economic Journal, Royal Economic Society, vol. 97(387), pages 718-26, September.
  17. Saibal Kar & Basudeb Guha-Khasnobis, 2006. "Foreign Capital, Skill Formation, and Migration of Skilled Workers," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(2), pages 107-123.
  18. Eran Razin, 1992. "Paths To Ownership Of Small Businesses Among Immigrants In Israeli Cities And Towns," The Review of Regional Studies, Southern Regional Science Association, vol. 22(3), pages 277-296, Winter.
  19. Clark, Kenneth & Drinkwater, Stephen, 2000. "Pushed out or pulled in? Self-employment among ethnic minorities in England and Wales," Labour Economics, Elsevier, vol. 7(5), pages 603-628, September.
  20. Moore, Robert L, 1983. "Employer Discrimination: Evidence from Self-Employed Workers," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 496-501, August.
  21. Lofstrom, Magnus, 1999. "Labor Market Assimilation and the Self-Employment Decision of Immigrant Entrepreneurs," IZA Discussion Papers 54, Institute for the Study of Labor (IZA).
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