Home Country Work Experience and Immigrant Self-Employment in the United States

Abstract

Immigrant entrepreneurship in the United States has grown steadily in the last four decades. In this paper, I study the occupational choices of legal permanent residents and their associated earnings in paid and self-employment. Using a unique data set with pre- and postmigration individual-level information, I analyze the role of home country work experience of immigrants in their probability of becoming entrepreneurs and their earnings after migration. To control for endogenous sector selection in the estimation of earnings distributions, I follow a novel identification strategy based on extremal quantile regressions that does not require exclusion restrictions or a large support variable. I find that foreign work experience in paid and self-employment is an important predictor of entrepreneurship after migration. In addition, it impacts earnings in the United States but differently across sectors, controlling for human capital, assimilation, time, region of origin, U.S. destination, previous migratory status, and demographic characteristics. Overall, my results highlight the role played by immigrants’ labor market history from their home countries to better understand their outcomes in the United States.