Entrepreneurship and Race, 1989 – 2016

A look at differences in entrepreneurship participation rates across race.

This analysis examines the prevalence of entrepreneurship across U.S. households by race from 1989 to 2016. We are looking for racial differentials in entrepreneurship participation, and evidence of changes over time. The data suggest that entrepreneurship rates have been relatively constant over the time period studied, and that whites are more likely to participate in entrepreneurship.

Data

We use data from the Survey of Consumer Finances1 We use the convention of identifying entrepreneurs through a “self-employed” labor market status or through reported possession of an actively managed busienss.2 For race, we focus on the race of the households’ head, as defined in the data. Of course, there are many issues to unpackage when contemplating the Survey’s traditional methods for designating household heads, but we will bracket them here.

Results

Overall, the data appears to suggest that little has changed in self-employment rates across major race/ethnicity groups.

Entrepreneurship

Our first figure shows estimates of entrepreneurship participation rates from 1998 to 2016. These figures represent the estimated percent of U.S. households with at least one household head who is either self-employed or owns an actively-managed business.

Our estimates suggest that white-headed households’ entrepreneurship rates have been stable since the late-1990s. One can read the figure as suggesting that rates rose slightly among households whose heads chose to self-identify as black or Hispanic. If such an observation is indeed picking up on a definitive change, and is not a produce of random variation masquerading as a small trend, then one might not that most of this growth seems to have occurred in the early-2000s, and rates show no clear evidence of substantial growth afterwards. However, one could just as easily infer that there’s been very little change in entrepreneurship participation rates. That interpretation strikes me as the most conservative.

Self-Employment

Our second figure focused on self-employment rates only. The figure suggests that these rates were mostly stable among whites.

As with overall entrepreneurship participation rates, self-employment is highest among white-headed households, and has been relatively stable over the past several decades. One could read the data on Hispanic-headed households to suggest a slow long-term growth between 2001 and 2004, and stable rates thereafter. Among black-headed households, self-employment rates are lowest, and have been overall stable until 2016. It seems most prudent to wait for evidence from other data or subsequent years before believing that something changed in black self-employment rates.

Business Ownership

Our final figure looks at business ownership rates. Again, entrepreneurship is most common among white-headed households, and rates have been overall stable across major racial/ethnic groups.

Summary

Overall, this look at the data suggest that entrepreneurship participation rates have been stable over time across major racial/ethnic groups. Despite a range of policies and investments in the promotion of entrepreneurship, these rates have not risen considerably.


  1. Federal Reserve “Survey of Consumer Finances” Data from triennial survey, 1989 to 2016. Available for download at https://www.federalreserve.gov/econres/scfindex.htm
  2. SCF variables x4106, and x4706. We only consider self-employment among household heads.

For More

You can download the R Markdown file used to generate these results from Open Science Framework. The data used in this analysis is available for download here.