Self-employment Gap Research Articles

The Role of Information and Institutions in Understanding the Black-White Gap in Self-Employment

It has been well documented in the literature that ethnicity matters significantly in the determination of self-employment rates. In particular, African-American self-employment rates lag far behind rates for other racial groups. Similarly, the literature also provides evidence of the long lived nature of institutions and the link between institutions and decision making. After controlling for the appropriate factors that can lead to self-employment differentials, we provide an explanation for the self-employment gap that still exists between African-Americans and White Americans. We focus on the important role of repeated negative institutional shocks and how such shocks influence the development of an information matrix as well as the transmission of information across time and generations. We show that African-Americans who were less likely to be influenced by negative institutional shocks and the information stock created from these experiences, have similar self-employment rates to comparably situated White Americans.

Hispanic Self-Employment: A Dynamic Analysis of Business Ownership

This paper analyzes causes of the low self-employment rates among Hispanics, which are nearly half of non-Hispanic white self-employment rates. Relatively little is known of the reason for the lower entrepreneurship rates among Hispanics, the fastest growing ethnic group in the U.S. The paper analyzes the self-employment gap by studying self-employment entry and exits, which determine the observed self-employment rates, utilizing nationally representative longitudinal data, the 1996 panel of the Survey of Income and Program Participation (SIPP). The data reveals differences between Mexican-Hispanics and Hispanics not of Mexican descent, referred to as Other-Hispanics. While Mexican-Hispanics are less likely to enter self-employment, relative to whites, Other-Hispanics are more likely to start a business. The differences however, are relatively small but shown to be meaningful in explaining the white-Hispanic self-employment rate gap. The data show large differences in business survival rates between Hispanics and whites. Mexican-Hispanics are almost twice as likely to exit business ownership in a year compared to whites. Our results indicate that differences in education and financial wealth are important factors in explaining differences in entrepreneurship across groups. We also show that the lower self-employment entry rates among Mexican-Hispanics is due to lower entry rates into business ownership of firms in relatively high barrier industries. In fact, Hispanics are more likely to start-up a business in a low barrier industry than whites. Differences in the industry composition across groups is also discussed and analyzed as a determinant of differences in business survival rates.

Gender Differences in Labor Market Decisions in Rural Guatemala

This study analyzes male–female differences in workforce participation and self‐employment in rural Guatemala. Gender differences in rural labor market outcomes are examined using the 1997 Survey of Rural Entrepreneurs and Financial Services, conducted in the rural areas of the departments of San Marcos, Quezaltenango, Huehuetenango, Alta Verapaz, Petén, and Chimiquimula. There are substantial differences in the labor force participation rates of men and women (86.5 vs 24.0 percent) and in self‐employment (49.8 vs 31.9 percent). The empirical results suggest that external constraints explain almost all of the observed gender gap in employment. Gender differences in individual endowments and human capital contribute to increase the male–female self‐employment gap; however, structural factors help to reduce gender differences in rural entrepreneurship.