Ethnic-group Differences in Retail Enterprise

Abstract

Applying the idea that ethnic enterprise benefits from the vertical integration of complementary economic activities, the present study examines ethnic-group differences in the retail trade in the late nineteenth century. Census data are used to estimate a regression model that explains retail enterprise as an outcome affected by wholesale enterprise and by the vertical integration of retail and wholesale enterprise. The results provide insights into the under- or overrepresentation of ethnic groups in the retail trade. For example, even if blacks had the same level of wholesale enterprise as did whites, and had vertically integrated retail and wholesale enterprise to the same extent as did the latter, blacks still would have been greatly underrepresented as merchants in the retail trade. This finding implies that blacks’ underrepresentation was substantially affected by outright discrimination against black retail merchants as well as by blacks’ extraordinarily low level of wholesale enterprise.