We study the relationship between ethnicity, occupational choice, and entrepreneurship.
Immigrant groups in the United States cluster in speciÖc business
sectors. For example, Koreans are 34 times more likely than other immigrants
to operate dry cleaners, and Gujarati-speaking Indians are 108 times more likely
to manage motels. We develop a model of social interactions where non-work
relationships facilitate the acquisition of sector-speciÖc skills. The resulting scale
economies generate occupational stratiÖcation along ethnic lines, consistent with
the reoccurring phenomenon of small, socially-isolated groups achieving considerable
economic success via concentrated entrepreneurship. Empirical evidence
from the United States supports our modelís underlying mechanisms.