What influences entrepreneurship among skilled immigrants in the USA? Evidence from micro-data

Self-employment among immigrants is a key source for income and social assimilation with natives. Rate of self-employment is significantly higher for immigrants than for native-born individuals, and the causal reasons behind this differential are still not well understood. We hypothesize that a key factor is that domestic employers often cannot accurately assess the quality of higher education received by the immigrants in their home countries. This lowers immigrants’ return to human capital in the traditional job market relative to natives. Our hypothesis predicts that this factor should be reflected in higher relative rates of self-employment for immigrants that rises with the level of education. We test and confirm this hypothesis using IPUMS micro-data from the USA.