Spatial Diversity in the Decline of Ethnic Economies during the Great Recession

Mahesh Somashekhar, Princeton University

Economic downturns often hurt foreign-born workers more than native-born workers. Some scholars suggest that ethnic minorities respond by working in the ethnic economy, where, unlike in the larger labor market, business owners may hire extra workers in order to protect co-ethnics from unemployment. No nationally representative study has demonstrated the viability of this assertion, however. Using American Community Survey data from before and after the Great Recession on eight national-origin groups, this study finds the phenomenon to occur on a large scale. Nevertheless, the protective effect of ethnic economies is limited to urban areas. Suburban ethnic economies are more likely to accelerate unemployment growth. These results are driven by those suburban regions whose small ethnic populations likely live there to expand the ethnic economy to new markets. Scholars should acknowledge both the role of ethnic economies during downturns and the unique employment patterns of international migrants in the suburbs.