Entrepreneurship as a Response to Labor Market Discrimination for Formerly Incarcerated People

This article examines entrepreneurship as a response to labor market discrimination. Specifically, we examine entrepreneurship as a career choice for formerly incarcerated individuals, a group of individuals who face substantial discrimination in the labor market. Using the US National Longitudinal Survey of Youth 1997 data, we find that formerly incarcerated people are more likely to become entrepreneurs compared to individuals who have never been incarcerated. We take advantage of a quasi-experimental setting by using the staggered implementation of “ban-the-box” policies in the US to disentangle the underlying mechanism of how labor market discrimination affects formerly incarcerated individuals in their decisions to enter entrepreneurship. The findings suggest that formerly incarcerated Black individuals pursue entrepreneurship due to the discrimination they face from employers. We also find that entrepreneurship is a viable alternative career choice for formerly incarcerated individuals, yielding both higher income and lower recidivism rates.