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Firm racial segregation and affirmative action in the highway construction industry
Abstract
In this paper I document that highway construction firms in California, particularly those owned by blacks and Asians, exhibit
considerable racial segregation in that they are disproportionately located in zip codes with the greatest concentration of
own-race residents. I find that segregated firms serve a larger market than minority-owned firms that are not segregated and
that this effect is concentrated in black-owned firms. I next exploit the segregation of firms to examine the effect of affirmative
action on the success of minority-owned firms. Following the significant curtailment of affirmative action in California due
to a direct statewide ballot initiative, the number of highway construction establishments located in zip codes with the highest
concentrations of black and Asian residents fell relative to the rest of the state, even conditional on the number of non-construction
establishments. This suggests that affirmative action policies may play a role in the net survival rates of minority-owned
firms.
... In a series of papers adopting a reduced-form analysis, the same author studies other aspects of preference policies related to affirmative action. Marion (2009a) studies the impact of Proposition 209 in California whose purpose is to eliminate race and gender considerations in the allocation of state funded projects. Empirical evidence suggests an important segregation in the sense that firms owned by minorities are usually located in areas with a higher concentration of own-race residents. ...
The empirical analysis of auction data has become a thriving field of research over the past thirty years. Relying on sophisticated models and advanced econometric methods, it addresses a wide range of policy questions for both public and private institutions. This chapter offers a guide to the literature by stressing how data features and policy questions have shaped research in the field. The chapter is organized by types of goods for sale and covers auctions of timber, construction and service procurements, oil and gas leases, online auctions, internet advertising, electricity, financial securities, spectrum as well as used goods. It discusses the idiosyncrasies of each good and the respective empirical findings.
Multiple studies document both the scarcity of small-business financing in inner-city minority communities and the higher loan application rejection rates among minority business enterprises (MBEs), compared with equally creditworthy White-owned firms. When MBEs do receive bank financing, they get smaller loans than Whites. Two aspects of these findings are troublesome. First, urban MBEs are heavily concentrated geographically in minority communities, raising the issue of whether difficulties accessing financing reflect firm location, minority ownership, or both. Second, applicable studies rest on weak theoretical foundations. The authors’ findings suggest that banks engage in discriminatory practices limiting credit availability to MBEs. Controlling for risk factors, however, firm location in a minority or inner-city neighborhood has no apparent impact on loan availability or size. Owner race/ethnicity, in contrast, is important. Subtle processes discourage MBEs from seeking bank loans. Owner race and wealth both powerfully shape loan access: high wealth opens doors, minority ownership closes them.
Using detailed spending and survey data of a large local governmental authority, this study analyzes how actual preferential procurement policies affected minority business enterprises (MBEs) selling to government clients. Current public sector preferential procurement policies have evolved in an environment of legal constraints in which procurement spending targeting MBEs has often been viewed as reverse discrimination. The objective of achieving a “level playing field” was adopted in response to this legal environment. Preferential procurement policies often miss their objectives, achieving perverse outcomes such as minimal assistance to MBEs and negligible local economic development impacts. Strategies for simultaneously achieving fundamental fairness in government procurement while increasing MBE capacity and job creation are identified.
This study examined nascent entrepreneurship by comparing individuals engaged in nascent activities (n = 452), after screening a sample from the general population (n=30,427). Due to the large sample size and the utilization of a control group of non-entrepreneurs (n=608), the findings of this study present a new approach to the relationship between human capital, social capital and entrepreneurship. Our primary objective was to help close the significant research gap regarding the sociological characteristics of nascent entrepreneurs, as well as to examine the comparative importance of various contributions and factors, such as personal networks and business classes. Having friends in business and being encouraged by them was a strong predictor regarding who among the general population eventually engaged in nascent activity. The study fails to support the role of formal education in predicting either nascent entrepreneurship or comparative success, when success is measured in terms of the three defined activities — creating a business plan, registering the business, or obtaining the first sale. Of particular note was that attending business classes specifically designed to promote entrepreneurship failed to be associated with successful business paths. This research suggests that national governments considering intervention activities might be wiser to focus on structural relationships than on programs specifically targeted to promote certain entrepreneurial activities. The facilitation of entrepreneurial social capital should be more successful if agencies filter their assistance through previous existing social networks. In addition, our findings suggest that countries that lack a very highly educated population may not be at a particular disadvantage regarding entrepreneurial activities.
Explaining how entrepreneurs overcome information asymmetry between themselves and potential investors to obtain financing is an important issue for entrepreneurship research. Our premise is that economic explanations for venture finance, which do not consider how social ties influence this process, are undersocialized and incomplete. However, we also argue that organization theoretic arguments, which draw on the concept of social obligation, are oversocialized. Drawing on the organizational theory literature, and in-depth fieldwork with 50 high-technology ventures, we examine the effects of direct and indirect ties between entrepreneurs and 202 seed-stage investors on venture finance decisions. We show that these ties influence the selection of ventures to fund through a process of information transfer.
This study assesses the importance of group membershipforimmigrant entrepreneurs in the lodging industry in Texas. It arguesthat such affiliation, and proximity, offers critical resources for strugglingmembers, thus improving chances of firmsurvival. Severalhypotheses—assuming that survival benefits enjoyed by group members are theresult of social capital—were tested. The data used includes all lodgingestablishments functioning in Texas between 1990 and1999, operated by Gujaratiimmigrant entrepreneurs. The lodging industry was chosen for this study because branded chainaffiliation offers an observable indicator and can contribute to socialcapital. A number of hypotheses were tested using event history analysis. Forevery history analyzed, the variables included motel survival, Gujaratiownership, and measures of Gujarati and non-Gujarati ownership of other hotelsin the proximity of an observed hotel. The findings offer evidence for benefits within groups of immigrantentrepreneurs in the United States. They also suggest the importance of groupmembership and geographic proximity in the immigrant entrepreneur's success,which makes a contribution to the literature of social networks.(CBS)
Using confidential microdata from the Characteristics of Business Owners survey, we examine why African American–owned businesses lag substantially behind white-owned businesses in sales, profits, employment, and survival. Black business owners are much less likely than white owners to have had a self-employed family member owner prior to starting their business and less likely to have worked in that family member’s business. Using a nonlinear decomposition technique, we find that the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes.
Spatial separation of racial and ethnic groups may theoretically have positive or negative effects on the economic performance
of those groups. We examine the effects of segregation on outcomes for blacks in schooling, employment, and single parenthood.
We find that blacks in more segregated areas have significantly worse outcomes than blacks in less segregated areas. We control
for the endogeneity of location choice using instruments based on political factors, topographical features, and residence
before adulthood. A one standard deviation decrease in segregation would eliminate one-third of the black-white differences
in most of our outcomes.
The main findings of this paper are that despite the existence of various affirmative action programs designed to improve the position of women and minorities in public construction, little has changed in the last twenty five years. We present evidence showing that where race conscious affirmative action programs exist they appear to generate significant improvements: when these programs are removed or replaced with race-neutral programs the utilization of minorities and women in public construction declines rapidly. We show that the programs have not helped minorities to become self-employed or to raise their earnings over the period 1979-2004, using data from the Current Population Survey and the Census, but have improved the position of white females. There has been a growth in incorporated self-employment rates of white women in construction such that currently their rate is significantly higher than that of white men. The data are suggestive of the possibility that some of these companies are 'fronts' which are actually run by their white male spouses or sons to take advantage of the affirmative action programs.
We show that immigrant managers are substantially more likely to hire immigrants than are native managers. The finding holds when comparing establishments in the same 5-digit industry and location, when comparing different establishments within the same firm, when analyzing establishments that change management over time, and when accounting for within-establishment trends in recruitment patterns. The effects are largest for small and owner-managed establishments in the for-profit sector. Separations are more frequent when workers and managers have dissimilar origin, but only before workers become protected by EPL. We also find that native managers are unbiased in their recruitments of former co-workers, suggesting that information deficiencies are important. We find no effects on entry wages. Our findings suggest that a low frequency of immigrant managers may contribute to the observed disadvantages of immigrant workers.
Four decades ago, Nathan Glazer and Daniel Patrick Moynihan made the argument that the black family "was not strong enough to create those extended clans that elsewhere were most helpful for businessmen and professionals." Using data from the confidential and restricted access Characteristics of Business Owners Survey, we investigate this hypothesis by examining whether racial differences in family business backgrounds can explain why black-owned businesses lag substantially behind white-owned businesses in sales, profits, employment size and survival probabilities? Estimates from the CBO indicate that black business owners have a relatively disadvantaged family business background compared with white business owners. Black business owners are much less likely than white business owners to have had a self-employed family member owner prior to starting their business and are less likely to have worked in that family member's business. We do not, however, find sizeable racial differences in inheritances of business. Using a nonlinear decomposition technique, we find that the relatively low probability of having a self-employed family member prior to business startup among blacks does not generally contribute to racial differences in small business outcomes. Instead, the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes. We also find that limited opportunities for acquiring specific business human capital through work experience in businesses providing similar goods and services contribute to worse business outcomes among blacks. We compare these estimates to contributions from racial differences in owner's education, startup capital, geographical location and other factors.
In the 1980s, many U.S. cities initiated programs reserving a proportion of government contracts for minority-owned businesses. The staggered introduction of these set-aside programs is used to estimate their impacts on the self-employment and employment rates of African-American men. Black business ownership rates increased significantly after program initiation, with the black-white gap falling three percentage points. The evidence that the racial gap in employment also fell is less clear as it is depends on assumptions about the continuation of pre-existing trends. The black gains were concentrated in industries heavily affected by set-asides and mostly benefited the better educated.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
This paper reviews 20 years' worth of empirical evidence on the 'spatial mismatch' hypothesis. After briefly surveying the relevant models from urban and labour economics and recent trends in employment and population suburbanisation, the empirical evidence on spatial effects is examined. This literature includes evidence on the effects of residential segregation, residential suburbanisation and employment suburbanisation, and direct measures of 'access' (such as travel times). The most recent evidence suggests that spatial mismatch is relevant for explaining black/white employment differences, though the magnitudes of these effects remain unclear.
Residential mobility policies are in part premised on the assumption that place and not race explains blacks' joblessness in central cities. The article investigates the potential effects of residential mobility programs by analyzing a “natural” black residential mobility process in the Washington, DC area, where black suburbanization has coincided with suburban job growth. Using data from the 1990 Public Use Microdata Sample (PUMS), this article examines the relative contribution of place and race in explaining racial differences in employment for young men with a high school diploma or less. The results show that having a suburban residential location improves young males' spatial access to jobs, but that the employment benefits are greater for white than comparable black youth. Simulations point to racial discrimination in suburban labor markets being as important as having a suburban residential location as an explanation of white-black employment rate differences in the Washington, DC area. Thus, if residential mobility programs are to be fully effective in improving central city minorities' employment prospects, antidiscrimination enforcement efforts in suburban labor markets must be included in the policy package.© 1998 by the Association for Public Policy Analysis and Management
This paper investigates the effect of disadvantaged business enterprise subcontractor goals on the winning bids for highway construction contracts using California's Proposition 209, which prohibited the consideration of race or gender in awarding state-funded contracts. After Proposition 209, prices on state-funded contracts fell by 5.6% relative to federally funded projects, for which preferences still applied. Most of the price decline after Proposition 209 resulted from the mix of subcontractors employed, which seems to arise from the higher costs of firms located in high-minority areas. Finally, short-run barriers to entry and expansion may increase the cost of affirmative action. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
This article explores the relationship between an ethnic-based social network and vertical integration decisions in the laundry
services industry. We find that stores in the social network are significantly less likely to vertically integrate than nonmember
stores. This has three primary implications. First, the social network may be lowering the costs of using the market more
than facilitating in-house production. This implies better outsourcing opportunities in a social network and may explain a
documented relationship between social networks and firm economic performance. Second, institutional details of our example
and the estimated relationship suggest a role for opportunism and reputation as determinants of the boundaries of the firm
in a setting without asset specificity. Finally, although we provide evidence that better access to credit can increase the
likelihood of vertical integration, we show that better outsourcing opportunities have a dominant effect of the social network
in this particular setting.
The Federal Highway Administration (FHWA) mandates states' use of affirmative action when awarding federally funded road construction projects. Here I document the effectiveness of this program in increasing purchases from disadvantaged business enterprises (DBEs). Higher goals for the utilization of DBEs, both across states over time and across projects within California, is associated with a greater share of contract dollars awarded to DBEs. This effect is concentrated among minority‐owned firms and is stronger when goals are more likely to be binding and in states with an apparently stricter enforcement regime.
This article examines and compares the spatial distributions of new jobs and people across sub-metropolitan areas for Atlanta, Boston, Detroit, and Los Angeles. The jobs data come from the Multi-City Study of Urban Inequality and the data on people come from the U.S. Bureau of the Census. The results indicate that less-educated people, public assistance recipients, and especially poor females with children mostly reside in areas heavily populated by minorities where the availability of less-skilled jobs is quite low, while the availability of these jobs relative to less-educated people in suburban areas heavily populated by whites is high. Large fractions of the less-skilled jobs in these metropolitan areas are not accessible by public transit. Furthermore, there is significant variation within both central cities and suburbs in the ethnic composition of residents and in less-skilled job availability. The ability of various minority groups to gain employment in each area depends heavily on the ethnic composition of the particular area. © 2000 by the Association for Public Policy Analysis and Management.
This article examines racial/ethnic differences in geographic job search behavior and the differential effects that this search has on groups' employment and wages in Los Angeles. Using data from the 1994 Los Angeles Survey of Urban Inequality (LASUI), the results indicate that, controlling for relevant characteristics, blacks, and on certain dimensions Latinos, extensively spatial job search to a greater degree than whites as measured by the number of areas searched. Moreover, this extensive spatial job is found to positively affect the employment of blacks and the wages of Latinos. Simulations show that increasing blacks' and Latinos' access to cars or decreasing their average distance to search areas will lead to greater geographic job search. In turn, this greater extensive spatial job search will lead to greater employment and wages for these groups, respectively. However, the gains in blacks' employment from increased extensive spatial job search are small in magnitude. These results are consistent with spatial mismatch.
An annual panel of employment at the census tract level for the Atlanta region is used to estimate the change in a tract's share of regional employment as a function of a variety of tax incentive programs, different transportation infrastructure investments, and crime. The results show that neighborhood-based property tax abatements, job tax credits, and highway improvements increase a tract's employment share. Higher crime is found to reduce employment share.
This study examines nascent entrepreneurship by comparing individuals engaged in nascent activities (n=380) with a control group (n=608), after screening a sample from the general population (n=30,427). The study then follows the developmental process of nascent entrepreneurs for 18 months. Bridging and bonding social capital, consisting of both strong and weak ties, was a robust predictor for nascent entrepreneurs, as well as for advancing through the start-up process. With regard to outcomes like first sale or showing a profit, only one aspect of social capital, viz. being a member of a business network, had a statistically significant positive effect. The study supports human capital in predicting entry into nascent entrepreneurship, but only weakly for carrying the start-up process towards successful completion.
The aim of this article is to analyze the effects of housing discrimination on the wages and unemployment rates of black workers. The unemployment effect is first analyzed using a simple minimum-wage model. An efficiency-wage model is then adopted in order to endogenize both unemployment and wages. Under both models, suburban housing discrimination leads to a higher unemployment rate for blacks in the central city than in the suburbs. Under the efficiency-wage model, black wages are also lower in the center. The analysis thus generates a link between unemployment and a seemingly unrelated phenomenon: racial discrimination in the housing market.
I. Negro residential segregation, 176. — II. Segregation in Detroit and Chicago, 178. — III. The distribution of negro employment,
179. — IV. Negro employment by occupation and industry, 183. — V. The level of nonwhite employment, 189. — VI. Suburbanization
and negro employment, 191. — VII. Postwar dispersal of employment and population in Chicago, 192. — VIII. Conclusions, 196.
I. Theory, 147.—II. Empirical results, 149.—III. Summary and conclusions, 155.—Appendix: Economic rationalisation for the
nonlinear reduced form, 158.
This paper presents an employment-based measure of intra- metropolitan accessibility to employment opportunities that provides strong evidence supporting the spatial mismatch hypothesis. The measure is based on intra-metropolitan variation in net employment growth rather than spatial variation in employment levels. The principal spatial disadvantage suffered by black male youths is their residence in areas of weak or negative employment growth. In pooled employment regressions, differential accessibility explains 30 to 50 percent of the neighborhood employment rate differential between white and black male Bay Area youths. In separate employment regressions by race, approximately one- fifth of the differential is attributable to differential access.
Airing your dirty laundry: Social networks, reputational capital and vertical integra-tion. Working paper The spatial mismatch hypothesis: What has the evidence shown? Urban Studies
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Gil, R., & Hartmann, W. R. (2007). Airing your dirty laundry: Social networks, reputational capital and vertical integra-tion. Working paper. Santa Cruz: University of California Santa Cruz Holzer, H. (1991). The spatial mismatch hypothesis: What has the evidence shown? Urban Studies, 28, 105–122.
Do preferential procurement programs benefit minority business? The American Economic Review
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Black ties only? Ethnic business networks, intermediaries, and African-American retail entrepreneurship
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