Racial differences in self-employment exits
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Using detailed work history data in the 1979 National Longitudinal Survey of Youth, I investigate the reasons behind the racial gap in self-employment. My analysis of an “age uniform” sample of men, all of whom are observed from age 22 to 40 years, reveals that racial differences in cross-sectional self-employment rates are largely due to the fact that minority workers’ self-employment spells are relatively short-lived. Moreover, I find that minority workers’ relatively high exit rates are driven primarily by transitions to nonemployment. Estimates from a multinomial logit model of self-employment exits suggest that minority workers’ weak attachment to the labor market prior to entering self-employment is an important determinant of their transition from self-employment to nonemployment, while lack of prior industry and self-employment experience contributes to minorities’ transitions to wage employment. When I assign blacks and Hispanics the same (mean) work histories as whites, the predicted black–white gap in the first-year self-employment survival rate decreases by 31% and the Hispanic–white gap decreases by 14%.
KeywordsSelf-employment Entrepreneurship Minority entrepreneurship Work history
JEL ClassificationsJ23 J63 L26 M13
This article contains work from my doctoral dissertation submitted to the Ohio State University. I would like to thank Audrey Light for her guidance and all-aspect supports. I also would like to thank Bruce Weinberg, Joe Kaboski, Maria Minniti, and two anonymous referees for providing valuable comments and suggestions. All remaining errors are mine.
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