Low-Skilled Immigrant Entrepreneurship

39 Pages Posted: 17 Nov 2009

See all articles by Magnus Lofstrom

Magnus Lofstrom

Public Policy Institute of California; Institute for the Study of Labor (IZA)

Abstract

More than half of the foreign born workforce in the U.S. have no schooling beyond high school and about 20 percent of the low-skilled workforce are immigrants. More than 10 percent of these low-skilled immigrants are self-employed. Utilizing longitudinal data from the 1996, 2001 and 2004 Survey of Income and Program Participation panels, this paper analyzes the returns to self-employment among low-skilled immigrants. We compare annual earnings and earnings growth of immigrant entrepreneurs to immigrants in wage/salary employment as well as native born business owners. We find that the returns to low-skilled self-employment among immigrants is higher than it is among natives but also that wage/salary employment is a more financially rewarding option for most low-skilled immigrants. An exception is immigrant men, who are found to have higher earnings growth than immigrants in wage/salary employment and are predicted to reach earnings parity after approximately 10 years in business. We also find that most of the 20 percent male native-immigrant earnings gap among low-skilled business owners can be explained primarily by differences in the ethnic composition. Low-skilled female foreign born entrepreneurs are found to have earnings roughly equal to those of self-employed native born women.

Keywords: immigrants, low-skill, earnings, self-employment, entrepreneurship

JEL Classification: J15, J16, J31, L26

Suggested Citation

Lofstrom, Magnus, Low-Skilled Immigrant Entrepreneurship. IZA Discussion Paper No. 4560. Available at SSRN: https://ssrn.com/abstract=1506312

Magnus Lofstrom (Contact Author)

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