Consumer demand and credit supply as barriers to growth for Black-owned startups

Eugene Tan and Teegawende Zeida

Journal of Monetary Economics, 2024, vol. 143, issue C

Abstract: We formulate a framework showing that differences in capital returns and capital intensity between groups of firms can identify relative differences in consumer demand and credit constraints. Using micro-data on Black- and White-owned startups, we find robust evidence that Black-owned startups have lower capital returns, implying that Black-owned startups face lower consumer demand due to race. In contrast, we find mixed evidence of tighter credit constraints due to race. We further show that differences in capital returns are persistent over time, whereas capital intensity differences are transitory. This suggests that lower demand, rather than credit constraints, might be the main barrier to growth for Black-owned startups.

Keywords: Entrepreneurship; Discrimination; Investment (search for similar items in EconPapers)
JEL-codes: E2 J1 L2 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Consumer Demand and Credit Supply as Barriers to Growth for Black-Owned Startups (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:143:y:2024:i:c:s0304393223001514

DOI: 10.1016/j.jmoneco.2023.12.001

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