Quid Pro Quota: A Cross-country Study on the Entrepreneurial Costs of Immigration Restrictions and Quotas

We study impacts of immigration restrictions on destination country entrepreneurial activity. Taking advantage of cross-country variation in immigration quotas and restrictions, we find increases in labor migration restrictions are associated with significantly less early-stage necessity driven entrepreneurship and significantly less established entrepreneurship among less educated migrants. At the same time, we find family reunion restrictions to be positively associated with established business ownership rates. We also find external migration restrictions (quotas) to be significantly associated with fewer rates of early-stage entrepreneurship among females and the less educated. Overall, our results suggest the impacts of immigration restrictions on entrepreneurship depend heavily on what types of immigrants are targeted by those resrtictions. Our results also indicate immigration restrictions make it relatively more difficult to open business for individuals who are already less prone to self-employment.