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Who Chooses to Work for Themselves? Cultural Integration and Incentives for Immigrant Self-Employment in the UK

Authors:

Pak Ho Merton Ngan ,

London School of Economics, GB
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Timothy Wong,

London School of Economics
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Amy Li,

London School of Economics
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Bryan Ling,

London School of Economics
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Wei Guang Tan,

London School of Economics
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Max Schachermayer

London School of Economics
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Abstract

We exploit the self-selection by comparing potential wages in employment choice to self-employed or employed sectors to examine the effect of cultural integration to the UK on the probability of self-employment and potential wages via citizenship status. Using 2 waves of panel data from the UK Household Longitudinal Survey in 2009 and 2014, we use variation in time in conjunction with the Heckman two-stage selection model to correct for the self-selection problem. We then explore the breakdown of these effects by self-employment and employment sectors. We find that there is a negatively significant effect of national identity on the probability of self-employment and a significant effect of being an immediate immigrant (2nd generation immigrant) for employed workers only. We make further extensions to account for individual unobservable heterogeneity and attempt to check for robustness in other factors such as parental education. However, we are limited by the low sample size and cannot comment on robustness or extensions with confidence. Our main results, however, corroborate with findings in the previous literature and indeed cultural identity plays a significant role in determining the sector of employment and potential wages.
How to Cite: Ngan, P.H.M., Wong, T., Li, A., Ling, B., Tan, W.G. and Schachermayer, M., 2021. Who Chooses to Work for Themselves? Cultural Integration and Incentives for Immigrant Self-Employment in the UK. Rationale, 3, p.22.
Published on 12 Sep 2021.
Peer Reviewed

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