Immigrant Selection and the Propensity for Self-Employment

Immigrants’ propensity for self-employment has primarily been studied using ethnic capital and economic-structural constraints as explanatory variables. The former explanation proposes a causal link between the self-employment rate of the country of origin and the propensity for self-employment in the destination country. The logic is that immigrants from countries with high rates of self-employment are more likely to have been self-employed or socialised into an entrepreneurial spirit. However, this reasoning ignores that immigrants are not randomly selected from their countries of origin, and thus neither selected from random economic positions nor uniformly affected by culture.

The purpose of this study is to measure the extent of immigrant’s specific entrepreneurial human capital, i.e. experience of self-employment, that they bring with them from their countries of origin; and to analyse to what extent this human capital transforms into the propensity for self-employment in the destination country. Data comes from the Level-of-Living Survey for Foreign Born and their Children (LNU-UFB), a Swedish survey conducted in 2011. LNU-UFB contains a unique employment biography with information on the respondents’ labour market activities from both before and after immigration, making it possible to create a year-by-year employment history.

Descriptive analysis of the data (N=2100) reveals that a considerably smaller proportion of immigrants in Sweden were self-employed before immigration than suggested by the average rates for their countries of origin. This accentuates that migrants to Sweden are not randomly selected, making national averages a poor approximation for their actual experiences. Furthermore, pre-immigration experience of self-employment, studied with discrete-time event history analysis, was correlated with propensity for self-employment in Sweden. Immigrants with this experience had both a higher overall rate of self-employment, and a shorter duration to first self-employment spell. The analysis highlights the importance of the entrepreneurial human capital that some, not all, immigrants bring.