Skilled and Unskilled Immigrants and Entrepreneurship in a Developed Country

Abstract

Evidence from some OECD countries suggests that skilled immigrants are over-represented in entrepreneurship. We offer an analytical explanation to show that it may be a direct outcome of asymmetric information between immigrants and potential employers in the rich countries. Limiting occupational choices to self-employment and employment, we show that skilled immigrants vis-à-vis natives may be proportionally over-represented in small businesses. This compensates for the income loss in the labor market. It results from higher critical risk aversion among skilled immigrants compared with natives and subsequently leads to higher average income for all immigrants in the cross-section. Finally, we show why a lesser number of unskilled immigrants enter self-employment and discuss the speed of income convergence between all immigrants and natives.

Self-employment by US county: key predictors

“…Previous works have principally focused on the demographic characteristics and culture of the individual entrepreneur (Anggadwita et al, 2017;Lofstrom, 2017;Ramadani et al, 2017;Beladi and Kar, 2015;Lin, 2010;Baycan-Levent and Nijkamp, 2009;Kanas, van Tubergen and van der Lippe, 2009;Harvey, 2008) rather than the geographical distribution of entrepreneurship as a whole. For some US counties, access to capital, culture and technology may represent entrepreneurial opportunity.…”

Institutionalized costs and international migration patterns

“…Another line of argument posits that the availability of public goods in advanced economies often acts as a magnet attracting migrants. It is also well known that-apart from pull factors-economic and/or political instability in source countries can often push workers to migrate (a detailed survey and modeling of these and related issues are available in Acharyya and Kar, 2014;Beladi and Kar, 2015). These and several other lines of discussion define the scope of this chapter.…”

“…2. See Beladi and Kar (2015), Friedberg (2000), Chau and Stark (1999), Stark (1989, 1987), Kwok and Leland (1982), among others. 3.…”

Short-Term Migration and Intergenerational Persistence of Industry in Rural India

“…We do not add any restrictions and assumptions on the distribution of income earned during the period of migration and post-return. In earlier models (see, Katz and Stark, 1987;Djajic and Milbourne, 1988;Mesnard, 2000;Beladi and Kar, 2015; etc) the migrant's income is treated as stochastic. The earlier models also apply a discount factor to his/her income, as a migrant since staying away from home leads to disutility.…”