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Migration and self-employment: the case of internal migrants

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Abstract

In this paper, I compare the self-employment entry rate of internal migrants within the United States to that of individuals who have not moved. Internal migrants are defined as native born Americans who have migrated from one state to another. After controlling for a broad range of demographic and labor market characteristics, I find that Americans who have migrated to a state that does not border their initial state of residence are approximately 43% more likely to enter self-employment than Americans who have not moved. This higher rate of entry into self-employment among internal migrants remains robust to the inclusion of a wide range of controls. Since internal migrants are individuals who have made the decision to migrate, but are otherwise similar to native born non-migrants, this finding supports the idea that the higher self-employment entry rate among immigrants is driven in part by self-selection.

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Data availability

Data for this project will be made available by the author upon request.

Notes

  1. Individuals who report having moved because of a new job or a job transfer are less likely to enter self-employment than non-movers (0.63% entry rate vs. 0.76% entry rate) consistent with the idea that these individuals possess strong ties to a particular employer.

  2. Most recent occupation, industry, and whether one was observed as being unemployed or not in the labor force.

  3. See https://www.census.gov/prod/2006pubs/tp-66.pdf for details on the design of the CPS.

  4. Although individuals are contacted for a total of 8 months over 2 different years, in practice most individuals do not appear every month due to non-response, an inability to contact respondents, etc. Approximately 34% of the sample is observed in every single month.

  5. This restriction primarily impacts individuals who have moved from one state to another. Only 1.9% of individuals who have moved within the same county report that they moved for either a new job or a job transfer. This is significantly lower than the 30.7% of individuals who have moved to a non-border state who reported that they moved for the same reason.

  6. Collectively, these individuals comprise only 0.3% of the sample.

  7. Region of birth of parents is accounted for using a series of dummy variables that record whether an individual has at least one parent born in; the United States, Rest of North America, Central America, South America, Northern Europe, Western Europe, Eastern Europe, Southern Europe, East Asia, South-East Asia, Indian Subcontinent, Middle East and North Africa, Western Africa, Southern Africa, or Oceania.

  8. A Republican-leaning state is defined as a state where the mean vote percentage received by Donald Trump in the 2016 and 2020 Presidential elections exceeds the mean vote percentage received by Hillary Clinton and Joe Biden in 2016 and 2020, respectively.

  9. Unfortunately, respondents to the CPS report their earnings only in their fourth and eighth months in the sample. This makes it impossible to record an individual’s actual earnings in their first month in the CPS, and therefore to observe initial earnings for individuals who subsequently entered self-employment.

  10. An individual is recorded as having migrated for family/relationship reasons if their reason for moving is recorded as any of the following; “Change in Marital Status”, “Other Family Reason”, “Relationship with Unmarried Partner”, or “Attend Leave/College”. Note that the last group is included since it is expected that many of these individuals are returning home to their family after having attended college elsewhere.

  11. Similar to the last subsection, in Appendix Table 11 the results are further split based upon whether an individual worked in a below median or above median paying occupation in their first month in the CPS. Among those who do not possess family/relationship ties in their new state of residence, the effect is strongest among those who initially worked in higher paying occuptaions, suggesting that the possibility of family ties facilitating stronger paid employment opportunities is unlikely to be driving the results.

  12. For some observations there are no individuals in the CPS earning business income in one’s detailed industry, state, and metropolitan area. For these individuals, the mean log business income of individuals in the same state and industry is used, without the requirement that they live in the same metropolitan area. For limited cases in which there are still no instances of non-zero business income, two-digit industry rather than detailed industry is used.

  13. For individuals who do not reside within a metropolitan area, the unemployment rate consists of the population weighted average of the unemployment rate in all non-metropolitan counties in their state of residence.

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Funding

This project was funded by a grant through the SMUworks program at Saint Mary’s University.

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  1. Saint Mary’s University, Halifax, Canada

    Nick Manuel

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  1. Nick Manuel
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This manuscript was prepared in it’s entirety by the author.

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The authors asserts that this project complied with all ethical standards.

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I would like to offer my sincere thanks to Marina Barros for her excellent work as a Research Assistant on this project. I would also like to acknowledge funding for this project from the Saint Mary’s University SMUworks program. Furthermore, I wish to thank two anonymous referees, as well as participants at the 2018 Doctoral Workshop in Appled Econometrics, the 2018 Canadian Economics Association Annual Meetings, and the 2018 Atlantic Canada Economics Association meetings for their helpful feedback on this project. All errors or omissions are mine alone. The data used for this project is available from the author upon request.

Appendix

Appendix

See Table 11.

Table 11 Marginal effects of migration status on probability of self-employment entry (split by reason for migration and mean occupation earnings)
Full size table

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Manuel, N. Migration and self-employment: the case of internal migrants. J Bus Econ 94, 613–637 (2024). https://doi.org/10.1007/s11573-023-01178-0

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