Credit Cards, Race and Entrepreneurship

We utilize a natural experiment, the Supreme Court"s 1978 Marquette decision which changed the interest rates that credit card companies could legally charge, to explore the impact of credit card availability on black entrepreneurship. Using self employment as a measure of entrepreneurship, we use Current Population Survey data from 1971-1985 to show that increases in rates following the Marquette decision led to increases in self-employment transitions among black individuals. We verify this same pattern using Survey of Consumer Finance data from 1977-1986 and find additional suggestive evidence that credit cards were an important financing tool that may have allowed black entrepreneurs to circumvent discrimination. We conclude with implications for research on entrepreneurship and public policy.