Being employed by a co-national: A cul-de-sac or a short cut to the main road of the labour market?

Self-employment is very common among some immigrant groups in Sweden and many of them hire co-nationals in their firms. One reason might be that they want to give newly arrived co-nationals the possibility to earn an income. But what are the consequences for the employees of being employed by a co-national? This paper analyzes the impact on labour income and future employment prospects of being employed by self-employed co-nationals shortly after arrival to Sweden. We find that immigrants in this group have substantially lower incomes than newly arrived immigrants with other forms of employment. We also find that they are less likely to work as employees in the private sector (other than being employed by a self-employed) in the future and are much more likely to become self-employed.