African Americans are underrepresented among self-employed workers. When African Americans own firms, they are less likely to have employees, operate with less financing, and are more likely to become discouraged enough to forego applying for loans. This study examines long term trends in African American entrepreneurship and the racial gaps in financing and self-employment among business owners. After controlling for owner and firm characteristics, a lack of financing leads to the shortfall between White and African American firms. Despite the financial constraints African American owned firms operate under, when they do receive financing, they consistently do more with less. The authors conclude that targeted financial programs like the Community Reinvestment Act may be a useful tool for policymakers when seeking to reverse these trends.
Documents
African-American Entrepreneurs: Contributions and Challenges Report