The Effect of Immigration on Native Self-Employment

Robert Fairlie and Bruce Meyer

IPR working papers from Institute for Policy Resarch at Northwestern University

Abstract: 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 metro-politan 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.

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Related works:
Working Paper: The Effect of Immigration on Native Self-Employment (2014)
Journal Article: The Effect of Immigration on Native Self-Employment (2003)
Working Paper: The Effect of Immigration on Native Self-Employment (2000)
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