Self-Employment of Immigrants: Understanding the Country of Origin Effects

Berkay Ozcan, London School of Economics and Political Science (LSE)
Serden Ozcan, Copenhagen Business School

A growing literature seeks answer to the question why immigrants from certain countries of origin are more entrepreneurial and whether entrepreneurship is culturally determined. Yet, focusing on the first-generation immigrants, this literature failed the thorny task of isolating the effect of institutional settings and macroeconomic conditions in origin countries from their “entrepreneurial culture”, and hence, has found inconclusive results. We propose that comparing second-generation immigrants that are born in the US, lived under the same macroeconomic climate and institutional setting, provides a way around this problem and alleviates the concerns about the immigrant selection. Using Current Population Survey (1994-2011), we explore how the rate of self-employment in the country where parents had originated from affects their children’s propensity to choose self-employment. Our preliminary results show a significant negative effect, which is robust to various specifications and fixed-effects. Overall, our study offers insights about cultural transmission of self-employment across immigrant generations