Consumer Demand and Credit Supply as Barriers to Growth for Black-Owned Startups

Eugene Tan and Teegawende Zeida

No 79, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

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: Discrimination; Investment; Entrepreneurship (search for similar items in EconPapers)
JEL-codes: E22 J15 L26 (search for similar items in EconPapers)
Date: 2023-11-03
New Economics Papers: this item is included in nep-ent, nep-sbm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Consumer demand and credit supply as barriers to growth for Black-owned startups (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:97508

DOI: 10.21034/iwp.79

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