Self-selection, location, and entrepreneurship: British self-employment in North America in the early 20th century

"The decision to undertake international migration has long interested economics and economic historians alike. Labour economists have placed considerable emphasis to the nature of self-selection among immigrants: under what conditions do individuals with high or low levels of skill choose to relocate across borders? Economic theory has been used to relate immigrant self-selection to relative economic conditions between source and destination regions, with the relative dispersion of earnings in the two areas thought to be a key determinant of immigrant selection (Borjas, 1987). This theoretical perspective can be extended to consider the choices made by immigrants from a single source country among a wider set of potential destination markets. While labour economists have examined immigrant selectivity in contemporary labour markets, the early twentieth century offers a better testing ground for this theory. As flows between Europe and North America were largely unregulated prior to 1917, we can observe how immigrants self-select across a set of labour markets in the absence of rigid immigrant policies and other constraints. Can differences in economic conditions lead destination countries to receive immigrants from the same source but with very different abilities in the labour market? Scholars of nineteenth century North America have asked this very question with reference to British immigration. Some observers of British immigration claimed that, due to the limited range of labour market opportunities in Canada, Britons choosing to reside in this country were considerably less able than those who chose to move to the United States. Recent work by Green, MacKinnon, and Minns (2002) finds that the economic characteristics of British immigrants in both countries were broadly similar circa 1900, but self-selection may lead to immigrant populations with important differences in unmeasured characteristics, such as schooling or innate ability. In this paper, we search for evidence of differences in immigrant self-selection across destination choices through an assessment of self-employment among British immigrants in Canada and the United States in the early twentieth century. We examine self-employment because it is one of the few indicators of labour market status available in both Canadian and American Census data from the early twentieth century, and one that is associated with high levels of human capital (Minns and Rizov, 2003). We use the United States Census of 1910 and the Census of Canada of 1901 to estimate the determinants of self-employment in both countries. Our results will provide important evidence on possible differences in immigrant self-selection between the two labour markets: in either the United States or Canada, were British immigrants better endowed with the characteristics associated with successful entrepreneurship, or more likely to become self-employed entrepreneurs, conditional on observable characteristics?"

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