Black Entrepreneurs, Job Creation, and Financial Constraints

Abstract

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Consumer Demand and Credit Supply as Barriers to Growth for Black-Owned Startups

“…In other words, Black entrepreneurs, while facing tighter credit constraints, do accumulate sufficient liquidity to self-finance their firms over time. Notably, this finding is consistent with recent research by Kim et al (2021) using detailed census data on the population of private businesses. In general, this suggests that Black-owned firms do inherently have the ability to overcome their financial constraints over time, and at a relatively fast rate.…”

“…Second, our paper also contributes to the literature on financial discrimination against racial minorities. Our paper is most directly related to the literature documenting financial discrimination against Black-owned firms (e.g., Robb, Fairlie, and Robinson (2009); Chatterji and Seamans (2012); Bates and Robb (2015); Fairlie, Robb, and Robinson (2020); Kim, Lee, Brown, and Earle (2021) and Brown, Earle, Kim, Lee, and Wold (2022)). Of particular note is Fairlie et al (2020), which documents similar findings in terms of financial discrimination, using the same data set.…”

Applications or Approvals: What Drives Racial Disparities in the Paycheck Protection Program?

“…Importantly, both differences in observable characteristics and in the impact of administrative burdens may themselves be driven by the historical legacy of racial bias. The fact that Black-owned firms tend to have lower revenues and fewer employees than white-owned businesses may be related to past instances of racially discriminatory treatment -such as in prior applications and approvals for credit -that affected a firm's financial condition (Fairlie, Robb, and Robinson, 2021;Kim et al, 2021). Racial disparities in the impact of administrative burdens may similarly be related to widely-documented racial disparities in access to financial services.…”