Labor market assimilation and the self-employment decision of immigrant entrepreneurs

This paper uses data from the 1980 and 1990 U.S. Censuses to study labor market assimilation of self-employed immigrants. Separate earnings functions for the self-employed and wage/salary workers are estimated. To control for endogenous sorting into the sectors, models of the self-employment decision are estimated. Self-employed immigrants are found to do substantially better in the labor market than wage/salary immigrants. Earnings of self-employed immigrants are predicted to converge with natives' wage/salary earnings at about age 30 and natives' self-employed earnings at about age 40. Including the self-employed in the sample reduces the immigrant-native earnings gap by, on average, 14%.