The State of Minority- and Women- Owned ... - Cleveland.com

Market-Based Disparities in Business Formation and Business Owner Earnings
V. Market-Based Disparities in Business Formation and Business
Owner Earnings
A. Introduction
In this chapter, we examine disparities in business formation and earnings principally in the
private sector, where contracting activities are generally not subject to M/WBE or other
affirmative action requirements. Statistical examination of disparities in the private sector of the
relevant geographic market area is important for several reasons. First, to the extent that
discriminatory practices by contractors, suppliers, insurers, lenders, customers, and others limit
the ability of M/WBEs to compete, those practices will impact the larger private sector as well as
the public sector. Second, examining the utilization of M/WBEs in the private sector provides an
indicator of the extent to which M/WBEs are used in the absence of race- and gender-conscious
efforts, since few firms in the private sector make such efforts. Third, the Supreme Court in
Croson and other courts acknowledged that state and local governments have a constitutional
duty not to contribute to the perpetuation of discrimination in the private sector of their relevant
geographic and product markets.
After years of comparative neglect, research on the economics of entrepreneurship—especially
upon self-employment—has expanded in the last 20 years. 227 As a result, there is now a good
deal of agreement in the literature on the microeconomic correlates of self-employment. 228 In the
U.S., it appears that self-employment rises with age, is higher among men than women, and
higher among non-minorities than minorities. The least educated have the highest probability of
being self-employed. However, evidence is also found in the U.S. that the most highly educated
also have relatively high probabilities. On average, however, increases in educational attainment
are generally found to lead to increases in the probability of being self-employed. A higher
number of children in the family increases the likelihood of (male) self-employment. Workers in
agriculture and construction are also especially likely to be self-employed.
There has been relatively less work on how institutional factors influence self-employment. Such
work that has been conducted includes examining the role of minimum wage legislation (Blau,
1987), immigration (Fairlie and Meyer, 1998 and 2003; Olson, Zuiker and Montalto, 2000; Mora
227 Microeconometric work includes Fuchs (1982), Borjas and Bronars (1989), Evans and Jovanovic (1989), Evans
and Leighton (1989), Fairlie and Meyer (1996, 1998), Reardon (1998), Fairlie (1999), Wainwright (2000),
Blanchflower and Wainwright (2005), and Blanchflower (2009) for the United States; Rees and Shah (1986),
Pickles and O’Farrell (1987), Blanchflower and Oswald (1990, 1998), Meager (1992), Taylor (1996), Robson
(1998a, 1998b), and Blanchflower and Shadforth (2007) for the UK; DeWit and van Winden (1990) for the
Netherlands; Alba-Ramirez (1994) for Spain; Bernhardt (1994), Schuetze (1998), Arai (1997), Lentz and Laband
(1990), and Kuhn and Schuetze (1998) for Canada; Laferrere and McEntee (1995) for France; Blanchflower and
Meyer (1994) and Kidd (1993) for Australia; and Foti and Vivarelli (1994) for Italy. There are also several
theoretical papers including Kihlstrom and Laffonte (1979), Kanbur (1990), Holmes and Schmitz (1990), Coate
and Tennyson (1992), and Cagetti and DeNardi (2006), plus a few papers that draw comparisons across
countries, i.e., Schuetze (1998) for Canada and the U.S., Blanchflower and Meyer (1994) for Australia and the
U.S., Alba-Ramirez (1994) for Spain and the United States, and Acs and Evans (1994), Blanchflower (2000),
Blanchflower, Oswald, and Stutzer (2001), and Blanchflower and Oswald (2008) for many countries.
228 Parker (2004) and Aronson (1991) provide good overviews.
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