America’s strong entrepreneurial tradition has been, for many, the pathway to the American dream. This is particularly true for many of the nation’s Hispanic immigrants and descendants who have been an integral part of the present-day U.S. entrepreneurial economy.
While there has been a growing interest in the role that Hispanics play in small-business formation, little work has been done on Hispanic entrepreneurial activity on the state level. Three states — Florida, New Mexico, and Texas — are of particular interest due to their significant Hispanic populations and their relatively large concentrations of Hispanic-owned businesses.
In 1997, Florida, New Mexico, and Texas all had Hispanic populations that were 20 percent or more of their total populations. Hispanic-owned firms also accounted for 20 percent or more of the total firms in these states.
But surprisingly, detailed analysis of publicly available data reveals disparate rates of Hispanic entrepreneurship between these states and others with lesser Hispanic populations and business-ownership rates. What could explain this divergence? Research suggests that state-level policy decisions, specifically in the realm of occupational-licensing laws, could be crucial elements of the answer to this question.
While recent research finds states with high rates of occupational licensing in low-wage occupations may dampen entrepreneurial activity, the current analysis shows state-level policies could be disproportionately affecting prospects for would-be Hispanic entrepreneurs.
Given these data, this paper argues first that rates of Hispanic entrepreneurship cannot be explained by varying concentrations of Hispanic-owned businesses alone, and second that the right state-level policy choices can improve these rates.
State policymakers should be seeking to unleash the dormant entrepreneurial potential in their states’ Hispanic populations. This will provide enormous benefits to the Hispanic community, our states, and the nation as a whole.
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