This paper analyzes the effect of an immigration pardon on immigrant entrepreneurship, by examining the effect of a pardon granted to about 300,000 undocumented Venezuelan immigrants in Colombia in 2018. Colombia hosts nearly two million Venezuelans, representing about 3.6 percent of the country’s population.
The Permiso Especial de Permanencia (PEP) is a de facto resident visa that gives the holder: (a) the right to access the formal labor market; (b) standing in Colombian courts; (c) access to the banking and borrowing system; (c) the right to remain in Colombia; and (d) access to social services including national healthcare, education, and welfare. The PEP visa did not create a new legal right to create and register a business, since foreign citizens in Colombia were already able to register a new business.
Initially, PEP was targeted to Venezuelan immigrants who had valid documentation. Following a nationwide census of undocumented Venezuelan immigrants living in Colombia conducted between April and June 2018, the Registro Administrativo de Migrantes Venezolanos (RAMV), the government extended the PEP program to undocumented Venezuelan immigrants who had registered in the RAMV and had valid Venezuelan citizenship documents. Among the 442,000 respondents to the RAMV, about 280,000 registered for the PEP (64 percent).
The analysis is based on RAMV census data matched to the Colombia registry of formal firms (Registro Unico Empresarial, RUES) using ID numbers for migrants.
- Receiving the PEP increased entrepreneurship. Migrants who obtained the PEP were more likely to start a company by 1.6 percentage points (an effect 10 times the mean level of entrepreneurship in the sample).
- The effect of the PEP on entrepreneurship increased over time. While the impact of PEP on starting a firm in 2018 is 0.2 percent, it increased to 0.5 by 2021, and 0.58 percent by 2022, a value close to the estimated Colombian native rate of 0.7 percent.
- The effect of legalization was over twice as large as the effect of migration. The effect on the probability of starting a firm of physically migrating to Colombia was half the magnitude of receiving the PEP. This suggests that the legal rights of migrants, and not only their physical presence in a country, are key for entrepreneurial investment.
- New firms were meaningful new sources of economic activity, whether employer or non-employer firms. Employer firms created one to six new jobs. The impact was larger for sole proprietorships than for higher quality sociedades (corporations and LLCs), but there was a significant increase in both types of firm formation.
- Effects were concentrated among individuals active in the labor force. Effects were positive and significant for informal workers or those who were previously self-employed, but insignificant for the unemployed, students and homemakers. This suggests the pardon increases the benefit of entrepreneurship for those already active in the labor force.
- PEP caused the creation of new ventures, rather than inducing the formalization of informal firms.
- There were heterogenous effects of the pardon, with larger effects for groups with greater time to spend on entrepreneurship, such as younger people, non-heads of households, and for firms with lower financial assets at founding. These results highlight the importance of time rather than access to capital as a vehicle for the pardon’s effect.
The authors conclude that providing undocumented immigrants with an immigration pardon, or amnesty, increases their economic activity in the form of higher entrepreneurship.