The Effect of Immigration on Native Self-Employment
Robert W. Fairlie
University of California, Santa Cruz - Department of Economics
Bruce D. Meyer
University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; National Bureau of Economic Research (NBER)
NBER Working Paper No. w7561
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 metropolitan 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.
Number of Pages in PDF File: 42
Date posted: May 5, 2000
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