Black entrepreneurs have higher rates of return on their businesses than Hispanic and white entrepreneurs: Cleveland Fed research

Black entrepreneurial households on average have a higher rate of return on their businesses than Hispanic and white households, according to new research from the Federal Reserve Bank of Cleveland.

In “Racial Differences in Returns on Business Ownership,” Cleveland Fed researchers Jacob Hager and Barış Kaymak look at entrepreneurial income and investments for households of different racial backgrounds. Their findings stand in contrast to well-documented observations that white households on average have higher net worth and net income than Black and Hispanic households. The findings also make low entrepreneurship rates among Black and Hispanic communities all the more puzzling.

“On the one hand, Black households and, to some extent, Hispanic households seem to have higher yields on their investments,” Hager and Kaymak say. “Given the lower rates of entrepreneurship in these communities, the discrepancy appears to be in gaps in entrepreneurial investments rather than the efficacy with which those investments are used.”

Read the Economic Commentary: Racial Differences in Returns on Business Ownership (clevelandfed.org)

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892