Abstract
This study explores the determinants of self-employment success and investigates what specific set of factors cause self-employed Hispanics to earn less business income than non-Hispanic Whites. This study contributes to the literature by: highlighting both the gender and ethnic differences that contribute to the income disparity between Hispanics and non-Hispanics; determining what factors have the biggest impact on business income; and providing gender- and ethnic-based policy prescriptions for bridging the income gap between Hispanics and non-Hispanics. To do this, the study uses data from the American Community Survey 2006-2008 3-Year sample. Once the data has been obtained, linear regressions are run to: 1) determine if there is a penalty for being Hispanic and/or a female, even after controlling for observable characteristics such as education; and 2) compare the returns to the observable variables included in the model for Hispanic men, Hispanic women, non-Hispanic White men, and non-Hispanic White women. Finally, the business income gap between Hispanics and non-Hispanics and between men and women is decomposed in order to determine how much of the gap is explained and how much of the explained portion is due to each variable in the model.
