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Being Employed by a Co-national: A Cul-de-sac or a Short Cut to the Main Road of the Labour Market?

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Abstract

This paper analyses the impact of working in an ethnic economy on subsequent labour market performance for newly arrived immigrants. Is it a short cut to the labour market or does it lock immigrants into low income jobs? Working in an ethnic economy is defined as being employed by a self-employed co-national. The comparison group is a matched sample of newly arrived immigrants who were without employment during the same period. Swedish panel data for the period 1998–2005 are used, and the sample is restricted to male immigrants, 20–55 years of age. Using propensity score matching, we find that immigrants who were employed by self-employed co-nationals are more likely to be employed in the near future, but that the types of employment they have are associated with lower incomes. Many continue to be employed by self-employed co-nationals or become self-employed themselves.

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Notes

  1. See Zhou (2004) for an overview.

  2. For studies of the effect of residential segregation on labour market outcomes in Sweden, see for example Edin et al. (2003).

  3. Andersson and Hammarstedt (2011) find that in Sweden ethnic enclaves increase self-employment propensity.

  4. An individual is defined as employed if the income received in November exceeds a certain limit. This limit varies by background characteristics such as age and gender, and is based on information from the labour force surveys in October and November. The aim is that individuals whose income in November corresponds to a monthly working time of four hours or more should be defined as employed. See Statistics Sweden, www.scb.se.

  5. In the Swedish multigenerational register, all family relations start from the parents. If immigrants arrive together with their parents to Sweden, it is possible to identify family ties also for this group. However, as this is not very common, information on most family members aside from those living in the household is lacking.

  6. Individuals are defined as self-employed if their largest income in November is from self-employment. The self-employment income is multiplied by the factor 1.6, determined by Statistics Sweden, when the comparison is made, in order to account for that self-employed on average report lower incomes than wage-earners in the same line of work. The self-employment category also includes owners of incorporated firms with ten or fewer stockholders.

  7. Judging from the last group’s average annual income of only about 4,300 SEK (approximately € 430) in 1999 (see Table 8, column 3), not many have worked during the year.

  8. See Caliendo and Kopeinig (2008) for an excellent overview of the modelling choices.

  9. See Becker and Ichino (2002) and Smith and Todd (2005) for different matching algorithms.

  10. When we compare the quality of the match using t test for equality of means of the treated and non-treated groups the nearest neighbourhood matching gives a better result.

  11. See Abadie and Imbens (2008) for a discussion of problems related to bootstrapping.

  12. Similar results have been found for the USA (Bayard et al. 1999; Catanzarite and Aguilera 2002) and Canada (Hou 2009).

  13. In 2003 and 2005, 82% and 86% were self-employed in the industry where they previously were employees.

  14. The incomes differ significantly between the treatment and control groups in all years except 1998.

  15. The incomes differ significantly between the treatment and control groups only in 1999 and 2000.

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Acknowledgements

We thank Anders Stenberg, two anonymous referees, seminar participants at the ESPE conference 2009, and seminar participants at the meeting between SULCIS and SULCIS Scientific Advisory Board in June 2009.

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Authors and Affiliations

  1. Swedish Institute for Social Research, Stockholm University, 106 91, Stockholm, Sweden

    Pernilla Andersson Joona & Eskil Wadensjö

Authors
  1. Pernilla Andersson Joona
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  2. Eskil Wadensjö
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Correspondence to Pernilla Andersson Joona.

Appendix

Appendix

Table 5 Birth region
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Table 6 Labour market states in 1998 for male immigrants, 20–55 years, who immigrated in 1993–1995
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Table 7 Labour market states in 1999 among those who were not employed in 1998
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Table 8 Sample means, 1998
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Andersson Joona, P., Wadensjö, E. Being Employed by a Co-national: A Cul-de-sac or a Short Cut to the Main Road of the Labour Market?. Int. Migration & Integration 13, 99–120 (2012). https://doi.org/10.1007/s12134-011-0195-3

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