Ethnic and Racial Self-Employment Differences and Possible Explanations

Abstract:     
The significant differences in self-employment rates across a large number of ethnic/racial groups are documented, and possible explanations for these differences are considered. Data from the 1990 U.S. Census of Population were used to examine 60 different ethnic/racial groups in the United States - this specificity allows identification of patterns not previously noted. Findings show that the self-employment rates differ enormously by ethnic/racial group for both men and women. All of the European groups have self-employment rates near or above the overall U.S. rates, for both genders. However, since the range across these groups is large, the broad categories of European or white would hide important differences across the ancestry groups. Ethnic/racial groups with origins in the Middle East or neighboring countries tend to have high self-employment rates. Asian self-employment rates differ substantially across ancestry groups. For example, the self-employment rates of Filipinos and Laotians are at or near the bottom of the distribution of self-employment rates, while the Koreans are at or near the top. The self-employment rates for Hispanic men and women are typically below the average U.S. rates. Black ethnic/racial groups--which include African Americans, Blacks from Central America, South America, Africa, and the Caribbean--have the lowest self-employment rates of any broad group. Black Africans and Blacks from the Caribbean have low self-employment rates compared to U.S. rates, but have notably higher rates of self-employment than African Americans. The only ethnic/racial group with higher estimated self-employment rates for women than men is the Vietnamese. In addition to ethnic/racial group and gender differences, it was found that each higher level of education is associated with a higher probability of self-employment. Explanations and theories for self-employment patterns and determinants have been offered in previous sociological and economics literature. Some of these theories are presented and their limitations discussed. One theory, regarding sojourners, suggests that self-employment is more frequent among immigrant groups who expect to spend a short time in the United States. However, results from the current study demonstrate that immigrants who have been in the U.S. for more than 30 years have higher self-employment rates than immigrants who have been in the country fewer than 10 years. Another theory argues that disadvantages such as poor English, poverty, or discrimination would compel certain groups to favor self-employment. However, this study found evidence contrary to this theory. The more advantaged groups, measured by earnings and other income, have the highest self-employment rates. Additional theoretical explanations for self-employment are examined, and often found to be applicable only for certain ethnic groups. (SFL)

Keywords: U.S. Census Bureau, Wages, Disadvantaged groups, Immigrants, Immigrant firms, Minority firms, Ethnic & racial groups, Minorities, Self-employment, Individual traits, Age, Gender, Educational background, Wage workers

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