Neighborhood Segregation and Black Entrepreneurship

20 Pages Posted: 28 Aug 2016 Last revised: 30 Nov 2017

See all articles by Eric Fesselmeyer

Eric Fesselmeyer

Singapore Management University

Kiat Ying Seah

National University of Singapore (NUS)

Date Written: February 9, 2017

Abstract

We examine the causal effect of neighborhood segregation on black entrepreneurship. We address neighborhood sorting by analyzing city averages and omitted variable bias by instrumenting for segregation using historical railroad configurations. We find that segregation has a significant positive effect: a 10 percentage point increase in the dissimilarity index decreases the racial gap by about 3.3 percentage points. To minimize the effect of cross-city sorting, we use a narrower sample constructed from outcomes of young adults and find a similar effect. Our findings are important because historically, entrepreneurship has been an avenue out of poverty, and entrepreneurship has been promoted as a way to decrease welfare and unemployment.

Keywords: Segregation, Inequality, Entrepreneurship, Self-employment

JEL Classification: D63, J15, L26, R12, R30

Suggested Citation

Fesselmeyer, Eric and Seah, Kiat Ying, Neighborhood Segregation and Black Entrepreneurship (February 9, 2017). Economics Letters, Volume 154, May 2017, Available at SSRN: https://ssrn.com/abstract=2829311 or http://dx.doi.org/10.2139/ssrn.2829311

Eric Fesselmeyer (Contact Author)

Singapore Management University ( email )

Singapore
Singapore

Kiat Ying Seah

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

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