Abstract
This article estimates the causal effect of residential concentration of co-ethnics (ethnic enclaves) on the probability to start a business among refugees in Sweden. Results indicate that the share of self-employed co-ethnics in the port of entry municipality increases refugees’ probability of entry into self-employment, while the actual share of local co-ethnics has no effect or, in some cases, a negative effect. The results support the conclusion that skills and resources within the local ethnic enclave, particularly skills relevant for self-employment, are crucial for generating new entry into self-employment for refugees, while simply more co-ethnics, plausibly increasing an ethnic market’s size, are of less importance. Moreover, the results suggest that being placed with a larger share of self-employed co-ethnics is negatively related to refugees’ long-term disposable income; however, assuming there is no or little selection of high-ability refugees into self-employment, this negative relationship can be counteracted by the choice of self-employment. The study adds new knowledge on the arguably crucial topic of socio-economic integration of an important group of international migrants — namely, refugees.
Highlights
The residential segregation of foreign-born residents presents an interesting policy trade-off
A first striking feature is that the estimations in columns (1) and (2) are fairly stable with regard to the effect of self-employed co-ethnics
If entrepreneurs who are placed with many self-employed co-ethnics experience too much competition and move to start a business in another municipality, the effects of self-employed co-ethnics at the arriving municipality may reflect the effect of competition rather than the effect of peers
Summary
The residential segregation of foreign-born residents presents an interesting policy trade-off. This article, attempts to shed further light on the relationship between ethnic enclaves and economic outcomes by estimating the causal effect of residential co-ethnic concentration on the probability of entry into self-employment among refugees in Sweden. Important suggested factors affecting entry into self-employment among minorities include discrimination and marginalization (Constant and Zimmerman 2006; Blume et al 2009), human capital variation (Lofstrom and Wang 2009), home-country business experience (Akee, Jaeger, and Tatsiramos 2013), and access to capital (Eliasson 2014).4 To develop these contributions, this article proceeds with a short theoretical discussion in section 2 on the relation between ethnic enclaves and entry into self-employment.
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