The Role of Information and Institutions in Understanding the Black-White Gap in Self-Employment

Ruth Uwaifo Oyelere and Willie Belton

No 3761, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: It has been well documented in the literature that ethnicity matters significantly in the determination of self-employment rates. In particular, African-American self-employment rates lag far behind rates for other racial groups. Similarly, the literature also provides evidence of the long lived nature of institutions and the link between institutions and decision making. After controlling for the appropriate factors that can lead to self-employment differentials, we provide an explanation for the self-employment gap that still exists between African-Americans and White Americans. We focus on the important role of repeated negative institutional shocks and how such shocks influence the development of an information matrix as well as the transmission of information across time and generations. We show that African-Americans who were less likely to be influenced by negative institutional shocks and the information stock created from these experiences, have similar self-employment rates to comparably situated White Americans.

Keywords: African-American; institutions; information; self-employment (search for similar items in EconPapers)
JEL-codes: D80 J01 J15 J24 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2008-10
New Economics Papers: this item is included in nep-ent and nep-lab
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Citations: View citations in EconPapers (2)

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