Firm Owners and Workers: An Analysis of Immigrants and Ethnic Concentration

Abstract

This dissertation consists of three chapters examining the important role of firm and coworker characteristics, as well as the use of social networks, in labor markets. The first paper investigates the effect of firm owners and coworkers on hiring patterns and wages. Immigrant-owned firms are more likely to hire immigrant workers. This prevalence is especially strong for Hispanic and Asian workers. We also find that the probability that a new hire is a Hispanic is higher for immigrant firms. On wage differentials, the results illustrate that much of the difference between the log annual wages of immigrants and natives can be explained by immigrants' propensity to work in non-native owned firms, which pay the lowest average wages. Interestingly, though, native workers holding a job in immigrant firms are paid less than immigrant workers. The last section examines the potential mechanisms for these findings. It explores the importance of job referral and use of networks for migrants in labor markets. We consider the theoretical implications of social ties between owners and workers in this context. Firms decide whether to fill their vacancies by posting their offers or by using their current workers' connections.

Next, we explore the patterns of immigrant concentration relative to native workers at the establishment level in a sample of metropolitan areas. Immigrants are much more likely to have immigrant coworkers than are natives, and are particularly likely to work with others from the same country of origin, even within local markets. The concentration of immigrants is higher for recent immigrants and interestingly for older immigrants. We find large differences associated with establishment size that cannot be explained solely by statistical aggregation. Exploring the mechanisms that underlie these patterns, we find that proxies for the role of social networks, as well as the importance of language skills in the production process, are important correlates of immigrant concentration in the workplace.