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.
Robert W. Fairlie, Department
of Economics, University of California, Santa Cruz
Bruce D. Meyer, Department of Economics, Northwestern
University
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