Casual evidence for some developed countries suggests that most talented migrants become entrepreneurs (positive sorting), but entrepreneurship might also be chosen by less talented migrants who have fewer opportunities in the labour market of the destination countries (negative sorting). Building upon Lucas (1978), we develop a theoretical framework to analyze the different mechanisms that draw migrants into entrepreneurship. We test the model predictions on a rich survey dataset of immigrants in Spain for 2006-2007. Our findings reject a U-shaped relationship between immigrants’ skills and self-employment for the Spanish case and instead point to only positive sorting into entrepreneurship. Self-employed migrants tend to have statistically better observable characteristics than salaried workers. However, penalties in the labour market beyond the mere human capital losses than migrants experience upon arrival, are also consistent with the relatively higher probability of self-employment and the lower entrepreneurial quality of certain migrant groups.
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Fac. Economic and Business Sciences ::: SIGUA: 0031P2029
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