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 Region and Country of Origin

The fact that immigrants as a group are no more entrepreneurial than natives does not mean that this is true for immigrants from all sending countries. This section examines self-employment by region and country of origin. Given the sample size of immigrants from some countries, the differences between countries should be interpreted with caution. The estimates are not quantified absolute differences, but can be used to make determinations of the relative differences between countries.

Self-Employment by Region of Origin

The first column of Table 9 (below) reports the self-employment rate of immigrants by region and country of origin, and the second column gives the average self-employment income for the self-employed. As we have seen, self-employment rates vary significantly by age and education. Therefore, the third column gives the average age for all immigrants from that region or country, while the fourth and fifth columns respectively show the percentage with less than a high school degree and the percentage with at least four years of college. Table 9 reads as follows: 6.3 percent of Mexican immigrants are self-employed, and self-employed Mexicans have an average annual self-employment income of $13,070. Mexican immigrants are, on average, 38 years old, with 64 percent being dropouts and 5.6 percent having at least a college degree.

Table 9 reveals some dramatic differences in entrepreneurial activity among immigrants by region and country of origin. For example, the difference between Middle Eastern immigrants who have a self-employment rate of 28.2 percent, the highest of any region and the self-employment rate of 4.8 for Central Americans, the lowest of any region, is extremely large. By region of origin, immigrants from Europe, the Middle East, and Canada (if it is treated as its own region) have self-employment rates that are four or more percentage points higher than those of natives. In contrast, immigrants from Mexico (if it is treated as its own region) and Central America have self-employment rates that are more than four percentage points lower. The self-employment rate for immigrants from other regions of the world are within a few percentage points of natives.

Although it is not as large as the variation in self-employment rates, there are large variations in income between immigrant groups. Those groups that have the highest self-employment rate also tend to have the highest income. However, groups with dramatically higher self-employment rates do not have incomes that are proportionately as high. For example, the self-employment rate of Middle Eastern immigrants is six times that of immigrants from Central America, but their income is about double that of Central Americans. This suggests that there is far more variation in the propensity to be self-employed among immigrants than there is variation in success once an immigrant has become an entrepreneur.

Self-Employment by Country of Origin

Turning to countries of origin, we see somewhat more variation in entrepreneurship. In particular, Koreans, Cubans, Canadians, and immigrants from the United Kingdom have the highest self-employment rates, while immigrants from El Salvador, Guatemala, Mexico, Haiti, the Dominican Republic, and the Philippines have the lowest rates of self-employment. There is also significant variation within regions. For example, Cuban immigrants are much more entrepreneurial than Haitian or Dominican immigrants, even though they are all from the Caribbean. What's more, among East Asian immigrants, Koreans have much higher self-employment rates than immigrants from the Philippines or China. While the smaller sample size for individual countries, compared to regions, explains some of the variation, it is also clear that immigrants from some countries are substantially more entrepreneurial than those from other countries.

What Explains the Differences Between Immigrant Groups?

While Table 9 is not a fully developed explanatory model of self-employment, it does provide important clues to why there are such large differences between countries and regions. Those groups that are on average older because they have been in the country on average longer, such as Europeans and Canadians, are more likely to be self-employed and have higher self-employment incomes than those groups that tend to be composed of younger and more recent arrivals, such as Mexicans, Central Americans, and immigrants from sub-Saharan Africa. Education also explains some of the differences. A very large share of immigrants from Mexico and Central America lack even a high school education and only a small percentage have a college degree. This partly explains their low self-employment rates and incomes. In contrast, Middle Eastern immigrants are the most highly educated and they have the highest rate of self-employment by region. Clearly, differences in both education levels and age account for a good deal of the variation in entrepreneurship between immigrant groups.

Age and education, however, do not account for all of the differences between immigrant groups. For example, 27.5 percent of college-educated Middle Eastern immigrants between the ages of 35-44 are self-employed. In contrast, college-educated Mexican immigrants in the same age group have a self-employment rate of only 10.5 percent. Thus, much of the difference between the two groups remains even after controlling for these two factors. This suggests that in addition to education and age, other factors facilitate and hinder self-employment. These factors are likely to include: the amount of money immigrants bring to the United States, the existence of networks of co-ethnic business owners who can provide capital and expertise, discrimination by lenders, and cultural attitudes toward entrepreneurship. But whatever the reasons for the differences between immigrant groups, it is clear that current immigration policy does not produce a flow of immigrants that fundamentally alters the overall level of entrepreneurship in the United States.