Volume 31, Number 4 (Fall) 1996
Fairlie, Robert W., and Bruce D. Meyer. 1996. "Ethnic and Racial Self-Employment Differences and Possible Explanations." Journal of Human Resources 31(4):757-793.
We show that self-employment rates differ substantially across 60 ethnic and racial groups in the United States. These differences exist within broad combinations of groups such as Asians and Hispanics, and are almost as great after regression controls, including age, education, immigrant status, and time in the country. We then provide evidence on a number of theories of self-employment. An ethic/racial group’s self-employment rate is positively associated with the difference between average self-employment and wage/salary earnings for that group. Ethnic/racial groups that emigrate from countries with high self-employment rates do not have high self-employment rates in the United States. Finally, we find that the more advantaged ethnic/racial groups, measured by wage/salary earnings, self-employment earnings, and unearned income, and not the more disadvantaged groups, have the highest self-employment rates.
Robert W. Fairlie is an assistant professor of economics at the University of California, Santa Cruz. Bruce D. Meyer is a professor of economics and a faculty fellow at the Center for Urban Affairs and Policy Research at Northwestern University. The authors would like to thank Wayne Atkins for help with the early stages of this project, and Theresa Devine, Christopher Jencks, Carolyn Moehling, Kevin Murphy, Harvey Rosen, Steve Trejo, Chris Udry, three anonymous referees, and seminar participants at the Econometric Society Meetings, the University of Chicago, UCLA, and UC Santa Barbara for their comments. The data used in this article can be obtained beginning in February 1997 through January 2000 from Robert W. Fairlie, Department of Economics, University of California, Santa Cruz, CA 95064.
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