The Cultural Effect - Evidence of Transnational and Intergenerational Transmission of Preferences for Self-Employment in Europe

Sammanfattning: This paper examines the effect of culture on self-employment among European immigrants. Using self-employment rate in the country of origin as a proxy for culture and defining the cultural effect on self-employment as transnational and intergenerational transmission of preferences for self-employment, we test the hypothesis that higher self-employment rate in the country of origin increases the probability of being self-employed. Running several fixed-effects regressions using data from the European Social Survey on both first- and second-generation immigrants, we find a positive and statistically significant association between an individual's probability of being self-employed and the self-employment rate in the country of origin. This relationship remains positive and significant after controlling for socio-demographic factors such as age, education and gender, and holds even after including parental self-employment as a control variable. While previous research on this relationship has been carried out in the United States, our study is, to the best of our knowledge, the first to use European data. By applying the methodology to a completely new sample, we add important evidence and generalizability to the previous studies suggesting that culture plays an important role in determining economic outcomes in general and determining self-employment decisions in particular.