Labor Market Discrimination, Imperfect Information and Self Employment
Author(s)
Coate, Stephen; Tennyson, Sharon
Abstract
The effect of labor market discrimination on self employment is analyzed. It is demonstrated that labor market discrimination may spill over into markets relevant to self employment, creating statistical discrimination in these markets. This statistical discrimination is purely a derived discrimination in that it would not occur in the absence of labor market discrimination. The implications of labor market discrimination for self employment outcomes is examined while recognizing the existence of these spillover effects. The analysis yields 2 useful insights: 1. Labor market discrimination is likely to imply that the expected returns from self employment are lower for individuals from discriminated against groups. 2. Labor market discrimination may actually result in those discriminated against having less incentive to enter self employment than individuals from other groups.
