Immigrant Population and Entrepreneurship Development in United States Metropolitan Areas

Abstract

This paper examines the relationship between the immigrant population and entrepreneurial activities in metropolitan statistical areas (MSAs) of the United States. Using a two-way fixed effects model on MSA-level aggregate data, aggregated from individual-level microdata for five periods from the U.S. Census spanning from 2000 to 2022, we find that higher proportions of the immigrant population at the MSA-level are significantly associated with increased overall self-employment rates. This relationship is particularly pronounced for unincorporated self-employment compared to incorporated self-employment. Our analysis contributes systematic evidence to the policy discourse surrounding the impact of immigration on economic opportunities for native-born populations. We observe that immigrants are more inclined to become entrepreneurs and are associated with an overall increase in entrepreneurial activities, suggesting they may generate additional employment opportunities for native-born individuals rather than displacing them. We also find that policies to incentivize and encourage relocating immigrants from high-immigrant MSAs to low-immigrant MSAs may benefit the country by increasing overall entrepreneurial activities. Our findings indicate that a 1% point increase in the foreign-born population share corresponds to an approximate increase of 0.1% points in self-employment rates.