Minority-Owned Business and the Great Recession

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2017-10-12

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Current economic research suggests that there is severe racial inequalities in small business ownership, outcomes, and startup capital; this, coupled ever increasing diversity in the U.S., will only continue to grow in importance to the overall, U.S. economy. Due to these differences, it follows that minority-owned businesses would have fared differently than majority-owned businesses during the Great Recession. As such, using a fixed effect model, as laid out by Ruhm (2000), this study uses data from the American Community Survey and Survey of Business Owners to investigate the relationship between macroeconomic conditions and small business performance by race, gender, and ethnicity at the state level while controlling for state fixed effect. Different ethnicities suffered a decline in firm health in different ways; this can be shown by the lack of statistically significant results for some groups amongst different indicators. These different factors suggest that each group of businesses gets hit differently by the recession. This is most probably caused by differences in social, financial, and human capital amongst the groups.

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