Consumer Discrimination and Black Firm Entry Deterrence: Some Reparable Damage Estimates

Abstract

The Theory of Restitution presumes that it is possible in principle to account for and measure deviations from racial fairness principles, that would serve as a benchmark for making restitution to black Americans, a group aggrieved and harmed by racial discrimination in the market place.To the extent that the number of black-owned rms in the market re ects, and is conditioned by consumer discrimination that redistributes surplus from black-owned rms to white-owned rms, a policy of set-asides that facilitates entry opportunities for black-owned rms can be defended as just and fair reparations. This paper estimates a limit pro t model of black rm entry utilizing data from the Survey of Minority-Owned Business Enterprises. As observations on rm entry are integer-valued, parameter estimates are obtained from Poisson and Negative Binomial regressions. Consumer discrimination by white consumers is treated as an entry barrier, and estimates of the lost producers' surplus due to consumer discrimination are obtained to benchmark the potential restitution due to black Americans. JEL Classi cation: D6, J7, L1 Associate Professor, Department of Economics, North Carolina A&T State University, Greensboro, NC 27411, e-mail price@ncat.edu Tel #: (336) 334-7744 Fax: (336) 334-7093.