Determinants of Self-Employment Among Immigrants and African Americans: Opting Out or Acting on Advantage?

Irina Voloshin, University of Washington

Studies on minority-owned businesses have shown that self-employment may provide avenues for economic mobility for those who are at a disadvantaged position in the wage/salary sector. If both African Americans and immigrants experience labor market disadvantage, and if entrepreneurship may mitigate this disadvantage, why, then, is there such a striking disparity between the self-employment rates of some immigrant groups and African Americans? Utilizing decennial Census data from 1980 to 2000, I examine two potential explanations for ethnic variation in self-employment rates: labor market disadvantage and the fiscal attractiveness of self-employment. While preliminary analysis results show evidence of persistent labor market disadvantage, the correspondence between the magnitude of income inequality and the proportion self-employed within each ethnic/immigrant group is tenuous. On the other hand, the self-employment rates ethnic/immigrant groups (especially those with highest self-employment rates) is observed to reflect fluctuations in economic returns to self-employment for those groups.