What Makes an Entrepreneur and Does it Pay? Native Men, Turks, and Other Migrants in Germany

Abstract

This paper focuses on the entrepreneurial endeavors of immigrants and natives in Germany.We pay closer attention to Turks, since they are the largest immigrant group with a strongentrepreneurial tradition, and the self-employed Turks in Germany represent about 70% of allTurkish entrepreneurs in the European Union. We identify the characteristics of the selfemployedindividuals and understand their underlying drive into self-employment. At thesame time we investigate how immigrant entrepreneurs fare in the labor market compared tonatives. Employing data from the German Socioeconomic Panel 2000 release we find thatthe probability of self-employment increases significantly with age for all groups albeit at adecreasing rate. Among immigrants, Turks are twice as likely to choose self-employment asany other immigrant group. The age-earnings profiles of self-employed German andimmigrant men are concave and surprisingly similarly shaped. While for self-employedGerman men hours of work and Treiman prestige scale scores increase their earnings, forself-employed immigrant men it is the longevity of the business that makes a difference.Everything else equal, the earnings of self-employed Turks are no different than the earningsof the self-employed Greeks, Italians, Spaniards, ex-Yugoslavs, Polish or other EastEuropeans, including those immigrants who have become German citizens.

Keywords: wage differentials, occupational choice, self-employment, entrepreneurship, immigrants

JEL Classification: J23, M13, J24, J61, J31