Ethnic and Racial Self-Employment Differences and Possible Explanations

We show that self-employment rates differ substantially across 60 ethnic and racial groups in the United States. These differences exist within broad combinations of groups such as Asians and Hispanics, and are almost as great after regression controls, including age, education, immigrant status, and time in the country. We then provide evidence on a number of theories of self-employment. An ethnic/racial group's self-employment rate is positively associated with the difference between average self-employment and wage/salary earnings for that group. Ethnic/racial groups that emigrate from countries with high self-employment rates do not have high self-employment rates in the United States. Finally, we find that the more advantaged ethnic/racial groups, measured by wage/salary earnings, self-employment earnings, and unearned income, and not the more disadvantaged groups, have the highest self-employment rates.