Negative self selection into self employment among African Americans

This paper attempts to shed light on the mechanism behind the lower rate of self-employment(SE)among African Americans compared with Caucasian Americans.Both consumer discrimination and discrimination in the credit market,combined with anti-discrimination law enforcement in salary/wage(SW)sector,explain why African American workers,eligible African American workers in particular,are less likely to be SE because the cost of being discriminated against is high.A previous influential study tested negative self-selection into SE among African American workers using Heckman\u27s sample selection correction under certain excluded variable assumptions.Using matched CPSpanel data,this paper tests the same prediction without relying on the excluded variable assumptions.More speciffically,current salary/wage workers are divided into prospective SE wokers and prospective salary/wage workers and the distributions of current earnings of these two groups are compared.The annalysis reveals both positive and negative self-selection into SE among Caucasian Americans,but almost only negative self-selection among African Americans.This finding is consistent with the theoretical predictions of consumer and credit market descrimination against African American self-employed workers and confirms the empirical results of the previous study.Includes bibliographical reference