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Entrepreneurial Ventures and Wage Differentials Between Germans and ImmigrantsAmelie Constant Yochanan Shachmurove The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent, nonprofit limited liability company (Gesellschaft mit beschränkter Haftung) supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. The current research program deals with (1) mobility and flexibility of labor, (2) internationalization of labor markets, (3) welfare state and labor market, (4) labor markets in transition countries, (5) the future of labor, (6) evaluation of labor market policies and projects and (7) general labor economics.
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ABSTRACT Entrepreneurial Ventures and Wage Differentials Between Germans and Immigrants *This paper focuses on the entrepreneurial undertaking of immigrants and natives in Germany. We first study factors that affect the sorting of individuals into self-employment and then we investigate whether self-employment has a differential effect on the wages of individual workers and can lead them to economic success. We employ recent data from the German Socioeconomic Panel that allow us to identify and compare four distinct groups: West Germans, East Germans, guestworkers, and ethnic Germans. We find that the probability of self-employment increases significantly with age for all groups. For immigrants, the years-since-migration exhibits a U-shape. During the first years since migration the likelihood of self-employment decreases over time. However, when immigrants have accumulated more years of residence in Germany, the likelihood is increasing again. This suggests that once immigrants have overcome the initial...