Reconsidering Immigrant Entrepreneurship —
An Examination of Self-Employment Among Natives and the Foreign-Born
by Steven A. Camarota
January 2000, ISBN 1-881290-05-0

Self-Employment by Geographic Area

Although immigrant levels of entrepreneurship are remarkably like those of natives nationally, this may not be the case across the United States. There may be parts of the country where immigrants are significantly more entrepreneurial than natives. The following section examines this question by looking at self-employment by state and metropolitan areas.

Self-Employment by State

Table 6 (below) reports immigrant and native self-employment rates for the top eight immigrant-receiving states. In six of the top eight states, natives have a higher self-employment rate than do immigrants. The largest difference is found in Arizona, where natives enjoy a 2.6 percentage-point advantage in self-employment. The smallest difference is in Florida where native self-employment is only .1 percentage points higher than immigrant self-employment. Illinois and New Jersey are the only states where immigrant self-employment is somewhat higher than that of natives. But even in those states the difference is small only 1.2 percentage points. The results indicate that there is little or no difference in the proportion of natives and immigrants who are entrepreneurs in the top eight immigrant-receiving states. Thus, despite the fact that immigrants differ significantly across states by country of origin and other demographic characteristics, there is not much difference in their self-employment rates in comparison to natives. The table also shows that self-employment is almost identical outside of the top immigrant states, with 11.8 percent of immigrants and 11.6 percent of natives being self-employed in the rest of the country. The fact that there is no significant difference in native self-employment between high- and low-immigrant states implies that the presence of immigrants does not have a significant positive or negative effect on self-employment among natives.

Self-Employment by Metropolitan Area

Table 7 (page 26) reports self-employment rates for the Consolidated Metropolitan Statistical Areas (CMSA) that have the largest immigrant populations, with several large central cities broken out separately. In the majority of metropolitan areas, natives either have a sizable advantage, as in the Dallas and Boston CMSAs, or less than two percentage points separate the two groups. This is true even in the San Francisco area, which includes the communities that comprise Silicon Valley. Of course, immigrants do make up a large share of the entrepreneurs in high-immigration CMSAs like San Francisco or Los Angeles. In 1997, for example, 27 percent of self-employed persons in the San Francisco CMSA were immigrants; however, immigrants also accounted for 27 percent of the local work force. This means that if immigrants are not counted, the overall level of self-employment in the San Francisco area (both city and CMSA) would be almost exactly the same. The findings in Table 6 indicate that it would not be correct to describe immigrants in San Francisco or other high-immigrant CMSAs as particularly entrepreneurial.

There are significant differences between high-immigration metro areas: Both immigrants and natives are much more likely to be self-employed in the San Francisco and Miami CMSAs than in Chicago or Dallas. But what is important about the findings in Table 7 is that there is little difference between immigrants and natives within the same metro area. With the possible exception of the Washington-Baltimore CMSA, there is no city where the inclusion of immigrants can be said have a significant effect on the overall level of entrepreneurship.¹⁷

In addition, like the state data in Table 6, there is no indication that high-immigration areas exhibit higher levels of self-employment than those parts of the country with few immigrants. Nearly two-thirds of the nation's immigrants live in the nine CMSAs shown in Table 7, and immigrants make up 25 percent of the workforce in these CMSAs. The total self-employment rate (immigrant and natives) in the top nine immigrant-receiving CMSAs is 11.4. In contrast, in those parts of the country outside of the top immigrant-receiving metro areas, immigrants make up only 6 percent of the workforce and the total self-employment rate is 11.8. Immigrants appear to have no impact on the overall level of entrepreneurship in a metropolitan area. Therefore, the presence of immigrants as entrepreneurs or their availability as workers has no obvious effect on entrepreneurial activity in a CMSA.

Self-Employment in the Central Cities

One argument often made by advocates of high immigration is that immigrants start businesses where they are most needed. That is, immigrants in depressed central cities are particularly entrepreneurial (Muller 1993; Wattenberg and Zinsmeister 1989; Frost 1999). This in turn revitalizes blighted and declining cities by creating businesses where no other entrepreneurs wish to locate. Stories of immigrant businesses in inner-city neighborhoods have been a common theme in news coverage of immigrant entrepreneurship in recent years. In addition to reporting self-employment rates by CMSA, Table 7 also provides the self-employment rate for immigrants and natives in the central cities of four metropolitan areas. Only self-employment within the central city is reported. The cities are chosen because they are the only central cities with an immigrant population that is large enough to measure using the CPS. In all four cities, immigrant self-employment is actually lower, not higher, than that of natives. Thus, at least in these cities, it would appear that immigrants are not more entrepreneurial than natives.

Table 8 (below) examines self-employment for persons living in all of the central cities of the nation's metropolitan areas.¹⁸ The table shows that immigrants in central cities throughout the country have exactly the same self-employment rate as natives 10.3 percent. In 1997, immigrants comprised one-fifth of employed persons 25 and over in central cities, and they made up one-fifth of the entrepreneurs. It would seem, therefore, that contrary to the often-heard argument, immigrants are not particularly entrepreneurial in the inner-cities. That is, if there were no immigrants in the nation's central cities, the self-employment rate would be exactly the same.

Looking at the entire central city may not be a perfect measure of immigration's ability to revitalize blighted neighborhoods. It may be that immigrants are much more entrepreneurial in those parts of a city in desperate need of new businesses, while at the same time they are much less entrepreneurial in the rest of the central city. This creates an overall self-employment rate in the core city that is the same as natives. While certainly possible, there is no evidence that this is the case. Immigrant entrepreneurs can be found throughout cities with large immigrant populations. Moreover, one would still expect that if immigrants were highly entrepreneurial in the inner city, then their self-employment rates would be significantly higher than natives in the nation's central cities. Because this is not the case, the argument that immigrant businesses are revitalizing the nation's inner cities by starting businesses at rates unmatched by natives is called into question.