Racial Discrimination and Minority Business Enterprise (PDF)

Using a large microdata sample from the most recent decennial census, this book documents the economic disparities facing minority-owned business owners relative to non-minorities. The book incorporates a wide range of geographic and industrial categories and demonstrates that these disparities persist even when other important factors such as education, experience, wealth and family structure are held constant. Self-employed business owners comprise an important and growing sector of the U.S. economy. In contrast to wage workers, the issue of discrimination against minority business owners has received little attention from economists. However, recent U.S. Supreme Court decisions have made the continued constitutionality of affirmative action in public sector purchasing and contracting contingent upon documenting the existence of discrimination against such businesses within relevant geographic or industrial boundaries. The author shows that among prime working age males, being an entrepreneur is a relatively more lucrative form of employment, on average, than working for a wage. Typically, however, non-Hispanic whites become entrepreneurs at much higher rates and receive much higher earnings than their black, Hispanic, and Native American counterparts. The author's findings of racial and ethnic disparities are strongest for black and Native American entrepreneurs. Positive levels of discrimination facing Hispanic and Asian entrepreneurs are also documented. The book also includes discussion of relevant Supreme Court decisions, how economists attempt to measure discrimination and the major sources of data available for studying minority business enterprise.