Black-Owned Firms, Financial Constraints, and the Firm Size Gap

J. David Brown, John Earle, Mee Jung Kim, Kyung Min Lee and Jared Wold

AEA Papers and Proceedings, 2022, vol. 112, 282-86

Abstract: We document the smaller average employment size and lower financial access of Black-owned businesses compared to White-owned businesses. Controlling for other characteristics, we find that observed differences in finance account for 60 percent of the 11.3 percent racial gap in number of employees; differences in returns account for 103 percent. The results imply that if both the levels and returns on finance were equalized across races, then Black-owned firms would be 18.4 percent larger than their actual size. Equalizing financial factors alone would reverse the firm size gap so that Black-owned firms would be larger than White-owned firms by 7.1 percent.

JEL-codes: D22 G21 G32 J15 L25 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1257/pandp.20221027

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