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Consumer Discrimination and Self-employment

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  • Borjas, George J
  • Bronars, Stephen G

Abstract

Self-employment rates and incomes differ significantly by race. The authors show that these differentials arise in markets with consumer discrimination and incomplete information about the price of the good and the race of the seller. Equilibrium income distributions have two properties: mean black incomes are lower than mean white incomes, and the returns to ability are lower for black than for white sellers. Able blacks, therefore, are less likely to self-select into the self-employment sector than able whites. Using the 1980 census data, the authors find that observed racial differences in the self-employment income distributions are consistent with the theoretical predictions. Copyright 1989 by University of Chicago Press.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:jpolec:v:97:y:1989:i:3:p:581-605
    DOI: 10.1086/261617
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    References listed on IDEAS

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    1. 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.
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    4. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, September.
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    7. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    8. Matthew S. Goldberg, 1982. "Discrimination, Nepotism, and Long-Run Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 307-319.
    9. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 485-506.
    10. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
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