Self-Employment and the Earnings of Immigrants

Abstract

We examine the question of the economic returns to immigrants engaged in self-employment....Based on samples of four entrepreneurial immigrants plus control samples of Blacks and Whites from the 1980 [U.S.] Public Use Microdata Sample we find large differences in the net effect of self-employment depending on the use of a linear (absolute dollar values) or loglinear (relative returns) form. We examine various explanations for the discrepancy and identify the role of outliers as significant. The loglinear form fits the data better but at the cost of obliterating substantively important information namely the preponderance of the self-employed among positive outliers. Effects of excluding the latter from the linear form and the theoretical and policy implications of alternative specifications of the earnings equation are examined. (EXCERPT)

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