Barriers to black entrepreneurship: Implications for welfare and aggregate output over time

Abstract

The number of black-owned businesses in the U.S. has increased dramatically since the 1980s, even compared to the number of non-black-owned businesses and the rise in black labor-market participation. From 1982 to 2012 the fraction black labor-market participants who owned businesses rose from 4 to 16 percent, compared to an increase of 14 to 19 percent for other participants. Combined with other evidence, this suggests black entrepreneurs have faced significant barriers to starting and running businesses and these barriers have declined over time. Interpreted through a model of entrepreneurship, we find declining barriers led to a permanent 14.4 percent increase in (consumption-equivalent) black welfare, a 5.2 percent increase in output per worker (compared to an observed 70 percent increase), and a 9 percent increase in the welfare of other labor-market participants. These impacts are in addition to any gains from declining labor-market barriers.