What Does Political Economy Tell Us About the Dearth of Black Entrepreneurs?

Abstract

There is a historical and consistent lack of parity in the Black community between labor and firms. Various authors have attributed entrepreneur-centered failures and shortcomings as the source of Black Entrepreneurship under-performance. This study, however, utilizing the Theory of Market Barriers, sought to discover the factors associated with market conditions that may play a causal role on new firm entry and coincidentally entrepreneurship choice. With count data from the Survey of Minority Owned Enterprises 1992-1997 (SMOBE), this study estimated the parameters of a Limit Profit Model to determine the effect political economic barriers have on new firm entry. The results implicate historical and ongoing biased policy generating imperfect market conditions lowering the economic value of entrepreneurial choice and hindering Black Entrepreneurship. This suggests that among the various explanations for the dearth of Black entrepreneurs, low Black labor demand and persistent high Black unemployment, barriers emanating from political economy, also appear to be important. JEL Classifications: I, J, O