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Self-Employment Trends Among Mexican Americans


  • Timothy Bates


Minority businesses are commonly aggregated into groups of 1) black, 2) Hispanic, and 3) Asian-owned firms. These analytical groupings may, in fact, be useful if blacks, Hispanics and Asians exhibit intra-group similarities and intergroup differences in terms of business development patterns. The applicable similarities and differences do appear to typify the Asian and black groups of self-employed, but they do not typify Hispanic-owned small businesses. In other words, "Hispanic" does not appear to be a useful category for analysis. The Hispanic subset, Mexican American-owned firms, is judged to be suitable for analysis. Most minority-owned firms have traditionally been started with minimal financial capital inputs by owners who have not attended college. The resultant small scale firms have frequently oriented their operations toward serving a low income minority clientele. In this study, I investigate two closely interrelated broad hypotheses on minority business dynamics, utilizing a sample of Mexican American business establishments drawn from the Characteristics of Business Owners data base: Traditional firms - these firms tend to a) be small scale, b) have high failure rates, c) and generate few jobs because of their minimal owner inputs of financial and human capital. Emerging firms, in contrast, are most commonly started by better educated owners--many of whom have attended four or more years of college--and financial capital inputs are high relative to those observed in traditional lines of business. It is because of these larger financial and human capital inputs that emerging firms tend to be a) larger scale, b) have lower failure rates, and c) generate more jobs, relative to their traditional cohorts. Sociologists have used the term "protected market" to describe the culturally-based tastes of ethnic minorities that can only be served by co-ethnic businesses. Particularly in the early years of settlement, immigrants are assumed to patronize co-ethnic enterprises, and this pattern of patronage seems to typify Hispanic enclaves in areas such as Southern California. Whether or not the resultant protected market is an asset to Mexican American firms-- particularly those in traditional fields such as small-scale retailing--is investigated econometrically. The evidence indicates that the protected market provided by immigrants patronizing co-ethnic enterprises is an absolute hindrance to Mexican American business viability. The very low incomes of most recent immigrants constrain the attractiveness of this protected market. The state of the barrio business community reflects the economic circumstances of its clientele.

Suggested Citation

  • Timothy Bates, 1990. "Self-Employment Trends Among Mexican Americans," Working Papers 90-9, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:90-9

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    References listed on IDEAS

    1. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-581, June.
    2. Brennan, Michael J & Schwartz, Edwardo S, 1978. "Corporate Income Taxes, Valuation, and the Problem of Optimal Capital Structure," The Journal of Business, University of Chicago Press, vol. 51(1), pages 103-114, January.
    3. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
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    Cited by:

    1. Lofstrom, Magnus & Wang, Chunbei, 2006. "Hispanic Self-Employment: A Dynamic Analysis of Business Ownership," IZA Discussion Papers 2101, Institute for the Study of Labor (IZA).
    2. Douglas W Dwyer, 1995. "Whittling Away At Productivity Dispersion," Working Papers 95-5, Center for Economic Studies, U.S. Census Bureau.
    3. Nathan Fiala, 2013. "Skills in the Marketplace: Individual Characteristics and Bargaining Ability in a Field-Based Experiment," Discussion Papers of DIW Berlin 1326, DIW Berlin, German Institute for Economic Research.
    4. Lofstrom, Magnus & Wang, Chunbei, 2006. "Mexican-Hispanic Self-Employment Entry: The Role of Business Start-Up Constraints," IZA Discussion Papers 2422, Institute for the Study of Labor (IZA).
    5. Brian Headd, 1999. "The Characteristics of Business Owners Database, 1992," Working Papers 99-8, Center for Economic Studies, U.S. Census Bureau.
    6. Bruder, Jana & Neuberger, Doris & Räthke-Döppner, Solvig, 2008. "Financial constraints of ethnic entrepreneurship: Evidence from Germany," Thuenen-Series of Applied Economic Theory 84, University of Rostock, Institute of Economics.

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