Immigrant and Minority Entrepreneurship in Federal Community Development Programs

Abstract

This study is about the role of immigrants and minority businesses in a recent community development initiative administered by the US Department of Housing and Urban Development (HUD). The Federal Renewal Community, Empowerment Zone and Enterprise Community (RC/EZ/EC) programs spanned the Clinton and Bush administrations and promised to be a synthesis of the two poles of community development policy in that the Federal government would invest in people in a particular place. The regulatory goals of this program are to develop community and faith-based partnerships, promote economic opportunity and advance sustainable community development. Local governments applied for and won the first wave of 8 EZ and 65 ECs in 1994. Later HUD designated 15 urban EZs in 1998 and in the year 2001 designated 8 EZs and 40 Renewal Communities. Meanwhile, the immigration to the US had increased dramatically through workers, refugee inflows and family reunification.

How did the RC/EZ/EC program that was targeted to neighborhoods with high poverty and unemployment incorporate immigrants compared to native born? The introduction reviews the evolution of the program in the context of community development and entrepreneurship in the United States. The introduction also describes specific program components using a typology of four types of communities (1) those with high immigration and services targeted to immigrants; (2) those with low immigration and no services targeted to immigrants; (3) those with high immigration but without services targeted to immigrants and (4) those with low immigration but services targeted to immigrants none the less.The most interesting finding from the analysis of the reports is that about one third of low immigration communities actively recruit immigrants and immigrant entrepreneurs in their community economic development strategy.

The second chapter asks if there a policy treatment effect of the EZECs compared to the rest of the county on entrepreneurship controlling for the jobs housing imbalance and longitudinal immigration trends. The rate of native born entrepreneurs in wage credit EZs increased 14 to 24% from 1990 to 2000 holding other variables constant (N=134). In regards to the impact of the EZEC on the jobs housing imbalance, there was a 6 to 17% reduction in target areas compared to the rest of the county holding other variables constant (N=162). The third chapter compares changes from 1990 to 2007 in business and non-profit establishments in RC/EZ/ECs in California, chosen because it is a high immigration state, and Tennessee, a low immigration state, using the National Establishment Time Series Database. There was a 25% increase in jobs for businesses with five or fewer employees in the wage credit areas during the wage credit period holding pre-intervention levels and trends for control and other treatment groups constant. However, minority businesses in California in wage credit areas experienced a 15% reduction in job growth holding other variables constant. The biggest effect size was a doubling of new wage credit eligible businesses in wage credit areas. On the other hand, the retail sector experienced a one time 30% reduction in new firms. For businesses with five or fewer employees, there was a 23% increase in new businesses holding other variables constant, but this was accompanied by a 3% reduction in the rate of new business formation. Minority businesses in Tennessee also saw a 115% increase in new businesses.

The last section concludes with recommendations for theory, research and policy. In particular, the Obama Administration has no plans to continue the RC/EZ/EC program. The new urban program is called the Sustainable Communities program and this is tied to parallel programs in the Department of Transportation and the Environmental Protection Agency. While the emphasis on sustainability can recover a missed opportunities in the EZ/EC principals, the shift to a regional planning approach may lead to disinvestment in low income neighborhoods that are not well connected to transit. Overall, the while the literature is mixed on the impact of the RC/EZ/EC program on neighborhoods, my research adds to the literature that argues that the program has a net social gain. However, additional outreach, training and credit strategies are needed to reach immigrant and minority entrepreneurs.