African Americansà pursuit of self-employment

Arbeitspapier

This study examines causes of black/white gaps in business ownership and self-employment rates by analyzing small-business entry and exit patterns. We proceed by recognizing heterogeneity in business ownership across different industry groups: a classification of firms by human- and financial-capital intensiveness, or entry barriers, we find, is useful for explaining racial differences in entrepreneurship. The barriers facing aspiring entrepreneurs seeking entry into low-barrier industries differ substantially from those limiting entry into high-barrier industries. Higher entry and lower exit rates typifying whites, relative to African Americans, are traditionally interpreted as reflections of the greater financial- and human-capital resources possessed by non-minorities. This consensus view, however, is simplistic. While education background is a powerful predictor of self-employment patterns in the low-barrier industries, advanced educational credentials actually predict lower entry: college graduates are less likely to select into low-barrier small business ownership. In the high-barrier fields, in contrast, college-educated individuals are more likely than less educated persons to enter into self employment. Overall, black presence in high-barrier fields is held down by lower net asset holdings and weaker educational credentials of potential and actual entrepreneurs. In the low-barrier industries, where the majority of black-owned businesses operate, net worth levels and educational backgrounds are trumped by the racial characteristic: low black entry and high exit rates are powerfully predicted by one's race.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 3156

Classification and Topics

• Classification: Wirtschaft ; Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
• Subject: Self-employment ; entrepreneurship ; entry barriers ; African American ; Selbstständige ; Unternehmer ; Farbige Bevölkerung ; Bildungsniveau ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lofstrom, Magnus ; Bates, Timothy
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/34264
• Last update: 10.03.2025, 11:45 AM CET