Why Are There So Few Black Entrepreneurs?

Bruce D. Meyer

NBER Working Paper No. 3537
Issued in December 1990
NBER Program(s):Labor Studies

Black entrepreneurship has been unsuccessful in the U.S. The fraction of employed blacks that work in their own businesses is about one-third that of whites. Other measures of success such as net income, number of employees, and form of organization show large differences between blacks and whites. This paper examines explanations for these differences, particularly focusing on the frequently cited economic explanations of liquidity constraints and consumer discrimination. Liquidity constraints are examined by estimating logit equations for who is self-employed in a cross-section and who becomes self-employed in a panel. These estimates suggest that net worth is not an important determinant of the racial differences in self-employment. An examination of small business starting capital indicates that little capital is needed to start most business and beginning entrepreneurs do not usually borrow. Examining the industrial distribution of black and white businesses, I do not find a greater relative representation of blacks in industries requiring less starting capital. I also examine if black businesses are relatively more common in industries where white customers more frequently patronize black businesses. Little support is found for this hypothesis. I conclude that cultural differences may explain black/white differences in self-employment, but this explanation requires further study.

download in pdf format
   (493 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3537

Users who downloaded this paper also downloaded* these:
Dunn and Holtz-Eakin w5622 Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links
Bernanke and Gertler w5146 Inside the Black Box: The Credit Channel of Monetary Policy Transmission
Blanchflower and Oswald w3252 What Makes an Entrepreneur? Evidence on Inheritance and Capital Constraints
Blanchflower, Levine, and Zimmerman w6840 Discrimination in the Small Business Credit Market
Holtz-Eakin, Joulfaian, and Rosen w4526 Entrepreneurial Decisions and Liquidity Constraints
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us