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Neighborhood segregation and black entrepreneurship

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  • Fesselmeyer, Eric
  • Seah, Kiat Ying

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.

Suggested Citation

  • Fesselmeyer, Eric & Seah, Kiat Ying, 2017. "Neighborhood segregation and black entrepreneurship," Economics Letters, Elsevier, vol. 154(C), pages 88-91.
    • Handle: RePEc:eee:ecolet:v:154:y:2017:i:c:p:88-91
    DOI: 10.1016/j.econlet.2017.02.025
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    1. Card, David & Rothstein, Jesse, 2007. "Racial segregation and the black-white test score gap," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2158-2184, December.
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    4. Harrison, Bennett, 1974. "Ghetto Economic Development: A Survey," Journal of Economic Literature, American Economic Association, vol. 12(1), pages 1-37, March.
    5. Elizabeth Oltmans Ananat, 2011. "The Wrong Side(s) of the Tracks: The Causal Effects of Racial Segregation on Urban Poverty and Inequality," American Economic Journal: Applied Economics, American Economic Association, vol. 3(2), pages 34-66, April.
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    More about this item

    Keywords

    Segregation; Inequality; Entrepreneurship; Self-employment;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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