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Neighborhood segregation and black entrepreneurship

Eric Fesselmeyer () and Kiat Ying Sky Seah ()

Economics Letters, 2017, vol. 154, issue C, 88-91

Abstract: We examine the causal effect of neighborhood segregation on black entrepreneurship. We address neighborhood sorting by analyzing city averages and omitted variable bias by instrumenting for segregation using historical railroad configurations. We find that segregation has a significant positive effect: a 10 percentage point increase in the dissimilarity index decreases the racial gap by about 3.3 percentage points. To minimize the effect of cross-city sorting, we use a narrower sample constructed from outcomes of young adults and find a similar effect. Our findings are important because historically, entrepreneurship has been an avenue out of poverty, and entrepreneurship has been promoted as a way to decrease welfare and unemployment.

Keywords: Segregation; Inequality; Entrepreneurship; Self-employment (search for similar items in EconPapers)
JEL-codes: D63 J15 L26 R12 R30 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.econlet.2017.02.025

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