The Effect of Immigration on Native Self-Employment

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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.

Published:

• Fairlie, Robert W. and Rebecca A. London, "The Effect of Incremental Benefit Levels on Births to AFDC Recipients," Journal of Policy Analysis and Management, Vol. 16, no. 4 (Autumn 1997): 575-597 ,
• Journal of Labor Economics, Vol. 21, no. 3 (July 2003): 619-650

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