What Makes an Entrepreneur and Does it Pay? Native Men,Turks, and Other Migrants in Germany

This paper focuses on the entrepreneurial endeavours of immigrants' and natives in Germany, concentrating on Turks, Germany's largest immigrant group and one under‐studied in the literature. Self‐employed Turks in Germany represent about 70 per cent of all Turkish entrepreneurs in the European Union. We use data from the German Socio‐economic Panel to study patterns of self‐employment. First, we identify the characteristics of the self‐employed individuals and understand their underlying drive into self‐employment. Next we investigate how immigrant entrepreneurs fare in the labour market and compare their earnings to those of the natives. It is important for decision makers to understand entrepreneurial patterns so that they can shape policy that better fosters entrepreneurial activities. This paper presents several findings that can inform better policymaking. First, our investigation indicates that education is not decisive in determining whether one will choose self‐employment over salaried work nor in explaining earnings. The estimated age‐earnings profiles are the same for natives and immigrants, while the proclivity to become self‐employed is concave with respect to age for both groups. Immigrants' start with a higher probability to work than natives but have a slower increase in the self‐employment probabilities thereafter. The earnings of self‐employed immigrants' are higher initially, but their earnings path crosses eventually that of the natives. Second, we find some suggestion of ethnic entrepreneurial spirit. Turks are 70 per cent more likely to be self‐employed than any other immigrant group, although they do not necessarily earn more. These patterns should be further explored.