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Mexican-Hispanic Self-Employment Entry: The Role of Business Start-Up Constraints

This article examines causes of the low self-employment rates among Mexican-Hispanics by studying self-employment entry using the 1996 panel of the Survey of Income and Program Participation (SIPP). The data show that Mexican-Hispanics are less likely to be self-employed or enter self-employment, relative to non-Hispanic whites. The authors analyze self-employment by recognizing heterogeneity in business ownership across industries and show that a classification of firms by human and financial capital “intensiveness,” or entry barriers, is effective in explaining differences in entrepreneurship across ethnic groups. The authors show that the lower self-employment entry rates among Mexican-Hispanics are due to lower entry rates into business ownership of firms in relatively high-barrier industries. In fact, Hispanics are more likely to start up a business in a low-barrier industry than whites.