The purpose of this paper is to analyse how the introduction of a liberalised regime for labour immigration in Sweden affected the self-selection of new immigrant entrepreneurs and to what extent the changes in entrepreneurial income among new immigrants was due to self-selection or to a changing business environment.
Based on rich microdata from Swedish administrative registers, this paper investigates how incomes changed during the years before and after the migration policy reform. By decomposing the income differential of new immigrant entrepreneurs arriving before and after the reform, this study estimates the contribution of a changed composition of migrants to the changing entrepreneurial income.
Entrepreneurial income among self-employed new immigrants improved after the reform, narrowing the immigrant–native income gap, while among employees, the income gap remained during the whole period of the study. Out of the total 10.9 per cent increase in log income, the authors find that 2.7 per cent was due to selectivity, i.e., changing characteristics of new immigrant entrepreneurs. The remaining 8.2 per cent was due to increased returns to characteristics, i.e., the characteristics of new immigrant entrepreneurs were better rewarded in the markets in the latter period. Hence, increases in entrepreneurial income among new immigrants were due both to self-selection and changes in the business environment.
The authors find that the migration policy reform had the effect of attracting successful immigrant entrepreneurs. Hence, the findings have implications for migration policy as well as for growth and employment policy.
This paper reveals a positive trend regarding income from the entrepreneurship of new immigrants after the liberalisation of labour immigration policy in Sweden. Theoretically and methodologically, the authors combine self-selection theory and the mixed-embeddedness perspective in a novel way, using rich data and a quantitative approach.
The authors are grateful for comments from Ali Ahmed, Roger Bandick and colleagues at the division for Business Administration and REMESO, Linköping University. This research was generously supported by the Marianne and Marcus Wallenberg Foundation and Handelsbanken Research Foundations. All errors remain of the authors’ own.
Kazlou, A. and Klinthall, M. (2019), "Entrepreneurial response to changing opportunity structures: Self-selection and incomes among new immigrant entrepreneurs in Sweden", International Journal of Entrepreneurial Behavior & Research, Vol. 25 No. 5, pp. 859-879. https://doi.org/10.1108/IJEBR-02-2018-0090
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