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The Ethnic and Racial Character of Self-Employment

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  • Robert W. Fairlie
  • Bruce D. Meyer

Abstract

Using the 1980 and 1990 Censuses, we show that self-employment rates differ substantially across ethnic and racial groups in the U.S. These differences exist for both men and women, within broad combinations of ethnic/racial groups such as Europeans, Asians, Hispanics and blacks, and after controlling for variables such as age, education, immigrant status and time in the country. Although there are large differences in self-employment rates across ethnic/racial groups, the processes determining self-employment within each ethnic/racial group are not substantially different. We find fairly similar effects of age, education, year of immigration, and other factors in determining who is self-employed for most groups. We examine whether ethnic/racial self-employment rates are associated with group returns to self-employment. We find evidence of a positive association between an ethnic/racial group's self- employment rate and the difference between average self-employment and wage/salary earnings for that group. This result suggests that our economic model of the self-employment decision may be useful in explaining differences in self-employment rates across ethnic/racial groups. We also find that different ethnic/racial groups locate their businesses in different types of industries. In addition, we do not find evidence that ethnic/racial groups who immigrate from countries with high self-employment rates have high self-employment rates in the U.S.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4791.

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Date of creation: Jul 1994
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Publication status: published as as "Ethnic and Racial Self-Employment Differences and Possible Explanations ," Journal of Human Resources, 31, Fall 1996, pp.757-793.
Handle: RePEc:nbr:nberwo:4791

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  1. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 485-506.
  2. Frank Fratoe, 1988. "Social capital of black business owners," The Review of Black Political Economy, Springer, vol. 16(4), pages 33-50, March.
  3. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February.
  4. Blanchflower, D. & Oswald, A., 1990. "What Makes A Young Entrepreneur?," Papers 373, London School of Economics - Centre for Labour Economics.
  5. Bruce D. Meyer, 1990. "Why Are There So Few Black Entrepreneurs?," NBER Working Papers 3537, National Bureau of Economic Research, Inc.
  6. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," NBER Working Papers 1942, National Bureau of Economic Research, Inc.
  7. Moore, Robert L, 1983. "Employer Discrimination: Evidence from Self-Employed Workers," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 496-501, August.
  8. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
  9. Farley, Reynolds, 1990. "Blacks, Hispanics, and White Ethnic Groups: Are Blacks Uniquely Disadvantaged?," American Economic Review, American Economic Association, vol. 80(2), pages 237-41, May.
  10. Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-59, November.
  11. Borjas, George J & Bronars, Stephen G, 1989. "Consumer Discrimination and Self-employment," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 581-605, June.
  12. Borjas, George J, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 123-50, February.
  13. Timothy Bates, 1989. "The changing nature of minority business: A comparative analysis of asian, nonminority, and black-owned businesses," The Review of Black Political Economy, Springer, vol. 18(2), pages 25-42, September.
  14. Victor R. Fuchs, 1982. "Self-Employment and Labor Force Participation of Older Males," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 339-357.
  15. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  16. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
  17. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  18. Frank Fratoe, 1986. "A sociological analysis of minority business," The Review of Black Political Economy, Springer, vol. 15(2), pages 5-29, September.
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Cited by:
  1. Fairlie, Robert, 2014. "Ethnic and Racial Self-Employment Differences and Possible Explanations," Santa Cruz Department of Economics, Working Paper Series qt24p7v6gc, Department of Economics, UC Santa Cruz.
  2. Taye Mengistae, 1996. "Age-size effects in productive efficiency: a second test of the passive learning model," CSAE Working Paper Series 1996-02, Centre for the Study of African Economies, University of Oxford.
  3. Lofstrom, Magnus, 1999. "Labor Market Assimilation and the Self-Employment Decision of Immigrant Entrepreneurs," IZA Discussion Papers 54, Institute for the Study of Labor (IZA).
  4. Wei Fan & Michelle J. White, 2002. "Personal Bankruptcy and the Level of Entrepreneurial Activity," NBER Working Papers 9340, National Bureau of Economic Research, Inc.
  5. Lynn A. Karoly & Julie Zissmopoulos, 2003. "Self-Employment Trends and Patterns Among Older U.S. Workers," Working Papers 136, RAND Corporation Publications Department.
  6. Wei Fan & Michelle J. White, 2001. "Personal Bankruptcy and the Level of Entrepreneurial Activity," Center for Financial Institutions Working Papers 01-11, Wharton School Center for Financial Institutions, University of Pennsylvania.

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