A spatial model of growth relationships and Latino-owned business

The expansion of ethnic minorities evokes policy debate about their impact on the local economy, driving a need to measure their effects. This article introduces a spatial econometrics approach to Deller et al.’s expansion of the Carlino-Mills growth model. We employ the confidential US Census data to investigate drivers of local economic performance with emphasis on the role of Latino-owned businesses (LOB) on convergence. The model also includes a number of controls. The model produces direct, indirect, and total impact estimates, and expected values for the non-LOB controls. The estimated total impact of LOB employment on county-level average annual growth rates is significant and positive, but a rurality interaction carries the opposite sign, such that the total impact in rural areas is negative. The negative effect in rural areas is due to negative spatial spillovers captured by the model. The spatial Durbin error model empirical results indicate that although LOB employment interacted with rurality significantly impacts county-level growth rates of population, employment, and income, they do not change the equilibrium relationship between these variables captured by the speed of convergence.