Why immigrant workers cluster in particular industries?

This is a great question. Why do we see certain type of people stick to certain industries? Just that this one is based on immigrants in US.

William Kerr of HBS looks at the questions like why there are Vietnamese manicurists, Korean dry cleaners, Haitian cab drivers, Gujarati motel owners?

In order to get a handle on how much this socialization leads to clustering, Kerr and Mandorff studied US census data on immigrant groups, using the degree of intermarriage within each group as a proxy for social concentration. Canadians living in America, for example, might be as likely to marry a natural-born citizen as a fellow expat. Other ethnic groups, such as Yemenis, Punjabis, and Bangladeshis, however, have more than an 80 percent chance of marrying within their own groups. For Eritreans, the rate is basically 100 percent.

The researchers then cross-referenced this information with employment data for the largest industry clusters within each ethnic group—for example, grocery stores for Yemenis, gas stations for Punjabis, and taxicabs for Bangladeshis and Eritreans. They found that the smallest and most concentrated groups were 2.5 times more likely to cluster in the same industries. That data, however, doesn’t necessarily explain why groups are clustering—whether they are forced into specialized industries through lack of opportunity or pulled in by choice through social ties. To get at those questions, Kerr and Mandorff compared the earnings of the immigrant groups. They found that for each ethnic group’s specialized industry, every 1 percent additional concentration translated into a 0.6 percent increase in total earnings.

That provides evidence that far from clustering out of desperation or discrimination, immigrants are choosing to specialize because of the advantage they are able to acquire through their social networks.

“If your group is concentrated, you are making an extra premium over what others in the industry are making, and over what other broadly self-employed people are making,” says Kerr. “This isn’t a case of Americans disliking Yemenis and forcing them into particular industries. This is a situation in which the more we find Yemenis working together in a particular sector, the more they are earning overall.”

 

Useful stuff..

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