The Role of Information and Institutions in Understanding the Black-White Gap in Self-Employment

38 Pages Posted: 19 Oct 2008

See all articles by Ruth Uwaifo Oyelere

Ruth Uwaifo Oyelere

Morehouse College; IZA Institute of Labor Economics

Willie J. Belton

Georgia Institute of Technology - School of Economics

Abstract

It has been well documented in the literature that ethnicity matters significantly in the determination of self-employment rates. In particular, African-American self-employment rates lag far behind rates for other racial groups. Similarly, the literature also provides evidence of the long lived nature of institutions and the link between institutions and decision making. After controlling for the appropriate factors that can lead to self-employment differentials, we provide an explanation for the self-employment gap that still exists between African-Americans and White Americans. We focus on the important role of repeated negative institutional shocks and how such shocks influence the development of an information matrix as well as the transmission of information across time and generations. We show that African-Americans who were less likely to be influenced by negative institutional shocks and the information stock created from these experiences, have similar self-employment rates to comparably situated White Americans.

Keywords: African-American, institutions, information, self-employment

JEL Classification: J15, J01, J24, D80

Suggested Citation

Uwaifo Oyelere, Ruth and Belton, Willie J., The Role of Information and Institutions in Understanding the Black-White Gap in Self-Employment. IZA Discussion Paper No. 3761, Available at SSRN: https://ssrn.com/abstract=1286699 or http://dx.doi.org/10.2139/ssrn.1286699

Ruth Uwaifo Oyelere (Contact Author)

Morehouse College ( email )

Department of Economics
Atlanta, GA 30332
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Willie J. Belton

Georgia Institute of Technology - School of Economics ( email )

217 Habersham
Atlanta, GA 30332
United States

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