Immigrant and Minority Entrepreneurship in Federal Community Development Programs

Author: Richard Smith

Dissertation School: The Regents of the University of California

Pages: 147

Publication Date: June 2010

Availability:
Available from the HUD USER Helpdesk P.O. Box 23268 Washington, DC 20026-3268 Toll Free: 1-800-245-2691 Fax: 1-202-708-9981 Email: oup@oup.org

Access Number: 10867

Abstract:

This study is about the role if immigrants and minority businesses in a recent community development initiative administered by the U.S. 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 RCs. Meanwhile, the immigration to the United States 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 nonetheless. 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 is a policy treatment effect of the EZ/ECs 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 percent from 1990 to 2000 holding other variables constant (N=134). In regard to the impact of the EZ/EC on the jobs housing imbalance, there was a 6- to 17-percent 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 nonprofit 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-percent 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-percent 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-percent reduction in new firms. For businesses with five or fewer employees, there was a 23-percent increase in new businesses holding other variables constant, but this was accompanied by a 3-percent reduction in the rate of new business formation. Minority businesses in Tennessee also saw a 115-percent 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 U.S. Department of Transportation and the Environmental Protection Agency. While the emphasis on sustainability can recover 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, while the literature is mixed on the impact of the RC/EZ/EC program on neighborhoods, my research added to 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.

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