Social Networks, Ethnicity, and Entrepreneurship
62 Pages Posted: 12 Jan 2017
Date Written: November 2016
We study the relationship between ethnicity, occupational choice, and entrepreneurship. Immigrant groups in the United States cluster in specific business sectors. For example, the concentration of Korean self-employment in dry cleaners is 34 times greater than other immigrant groups, and Gujarati-speaking Indians are similarly 108 times more concentrated in managing motels. We develop a model of social interactions where non-work relationships facilitate the acquisition of sector-specific skills. The resulting scale economies generate occupational stratification along ethnic lines, consistent with the reoccurring phenomenon of small, socially-isolated groups achieving considerable economic success via concentrated entrepreneurship. Empirical evidence from the United States supports our model’s underlying mechanisms.
Keywords: entrepreneurship, self-employed, occupation, ethnicity, immigration, networks
JEL Classification: L260, D210, D220, D850, F220, J150, L140, M130
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