Does racial prejudice affect black entrepreneurship?: evidence exploiting spatial differences in prejudicial attitudes

Nolan Kopkin

Applied Economics, 2017, vol. 49, issue 31, 3045-3066

Abstract: This article explores the relationship between racial prejudice towards blacks and the black-white self-employment rate gap and provides the first direct empirical evidence that racial prejudice negatively impacts black self-employment, particularly in high start-up cost industries. To perform this analysis, I construct a measure of prejudicial attitudes using responses from the General Social Survey and estimate the relationship between self-employment and this index using the American Community Survey. I find that an amount of prejudice equal to the difference in least and most prejudiced census divisions increases the black-white self-employment rate gap in high start-up cost industries by 10.4–16.8%, depending upon whether parental self-employment is controlled for, and represents the entire impact of racial prejudice on the black-white self-employment rate gap. Additionally, racial prejudice widens the black-white self-employment income gap by between 6.4% and 8.2% in my full specification, dependent upon how income is measured. Evidence indicates that racial prejudice is causing blacks difficulty in financing their businesses. The results presented are robust to various modelling and data assumptions.

Date: 2017
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DOI: 10.1080/00036846.2016.1254336

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