From Rags to Riches: How Robust is the Influence of Culture on Entrepreneurial Activity?

Entrepreneurial activity di ers substantially across countries. While cultural di erences have often been proposed as an explanation, measuring a country's cultural characteristics su ers from various problems. In this paper, we test the hypothesis that cultural factors in uence entrepreneurial behavior by looking at di erences in self-employment rates between immigrant groups within the same market. Such an approach allows holding constant factors such as the institutional and economic environment. Using U.S. census data for the year 2000, we nd signi cant di erences in the propensity to become self-employed across immigrants which is in line with previous ndings. However, previous studies could not relate self-employment rates in the U.S. to self-employment shares in the immigrants' home-countries which rejects cultural explanations. We improve over the existing literature by rst using a more reasonable proxy for self-employment shares. Second, we additionally account for determinants of self-employment in the immigrants' home countries. Both of these modi cations reverse the in uence of home-country determinants compared with previous ndings. Once we apply our modi cations, we nd evidence of a signi cantly positive relationship between self-employment rates of immigrants in the U.S. and entrepreneurial activity in their respective countries of origin. Our ndings suggest that we cannot reject culture as a major determinant of entrepreneurial activity. JEL classi cation: J21, J61, L26