Prosperity-Pull or Recession- Push?: Mexican Immigrant Self- Employment across the Business Cycle

PWP-CCPR-2014-016

Abstract

Immigrant populations may either be pulled into self-employment by the lure of high wages relative to wage and salary work, or they may be pushed into self-employment as a survival mechanism in the face of unemployment. Research that focuses on Mexican immigrant self-employment in the United States tends to stress the prosperity-pull hypothesis and pay little attention to recession-push hypotheses. The focus of this article is to understand the extent that Mexican immigrants enter self-employment as a response to unemployment. Using a unique panel dataset that captures fast-paced labor market changes over the 1994 to 2013 period, I find that Mexican immigrants – and Mexican immigrant men in particular – are more likely to become self-employed in economically bad times than native workers and less likely to become self-employed than native workers in good times. The threshold where Mexican immigrants have a higher rather than lower probability to become self-employed is at eight percent unemployment. These results filter throughout various subcategories and are consistent with recession-push hypotheses.