Is The Criminal Justice System A Barrier To Entrepreneurship In Fragile Communities?

In fragile communities where a high proportion of residents have limited opportunities for economic and social mobility, self-employment and entrepreneurship are possible pathways to economic and social mobility. If, for example, individuals perceive policing and offender sentencing as racially discriminatory and/or untrustworthy, criminal justice in fragile communities could potentially be a barrier to an individual’s decision to start a business, as such a decision can be sensitive to whether the legal system will protect individual property rights. This paper considers how, in fragile communities, individual fairness assessments and perceptions of the criminal justice system condition nascent entrepreneurship abandonment—individuals who considered starting a business but did not. With data from the Center for Advancing Opportunity Fragile Community Survey on over 5,000 individuals in the United States, we estimate latent variable specifications of abandoned individual aspirations to start a business as a function of several measures of their fairness assessment/perception of the criminal justice system. Parameter estimates reveal that the likelihood of abandoned nascent entrepreneurship increases with respect to increases in an individual’s assessment/perception that the criminal justice system is unfair in their community. Our results suggest that the criminal justice system is a barrier to entrepreneurship for residents of fragile communities, and that criminal justice reforms that promote fairness in policing and the courts could enhance economic and social mobility in fragile communities by increasing the likelihood of individuals starting businesses.