Microbusinesses in the Texas-Mexico Border Region:

Potential for Economic Community Development?

In the last 10 years the Texas-Mexico border economy has improved dramatically, but not all sectors of this region are enjoying the benefits of this growth. The areas more critically left behind are colonias, which are highly concentrated poverty pockets that are physically and legally isolated from neighboring cities. Women in these communities are the least likely to benefit from economic growth as they are usually less educated, more isolated (as they have less participation in the labor force), and have less language skills (as many do not speak English) than their male counterparts.

One commonly proposed policy to address poverty is the promotion of microbusinesses, based on the assumption that self-employment provides a route out of poverty and an alternative to unemployment or discrimination in the labor market (Borjas 1986; Meyer 1990). It is argued that this is especially relevant for marginalized ethnic and/or racial groups (Glazer and Moynihan 1970). These arguments resulted in the proliferation of policies promoting self-employment. However, others argue that self-employment has little positive impact on disadvantaged groups as they have high failure rates (Meyer 1990) and show returns lower than wage/salary workers´┐Ż earnings (Bates 1997; Servon and Bates 1998). Most recently, Fairlie (2001) has acknowledged that self-employment has been a better route for economic success than fixed income strategies. His findings applied clearly to men, while women do not show similar behavior. Furthermore, policies against poverty have promoted women-owned businesses on the basis that they represent a tool for increasing family income and community economic development. These mixed views in the literature show a lack of consensus on how men's and women's entrepreneurial behavior in low-income minorities impact economic performance. Our research aims to bring more elements into this discussion based on the case of colonias in the Texas border region.

Through our experience in a Microenterprise Training and Development Program in four colonias in the Laredo area, we have realized that there is a lack of systematic information on micro and small business in colonias, and this research will fill this gap. The key question in our proposal is whether the promotion of self-employment among disadvantaged individuals, and women in particular, is a viable economic strategy to poverty alleviation. We propose to study selected colonias in the Texas-Mexico region, and apply a series of interviews with the objective of gathering information on micro and small businesses, their role within their communities, and the main obstacles they face. Which economic sectors are more likely to be represented, how do they contribute / not contribute to local economic growth? Another objective will be to get a better understanding of the needs of education and training of colonias residents. Most of the literature indicates that lack of training and difficulties in obtaining loans are the key obstacles confronting self-employed minorities (Harrison, 1995; Kijakazi, 1997), and this research will provide concrete evidence if this is the case in colonias. Most authors also point to self-confidence and lack of networking as female problems (Richardson Harthshorn 1993; Wilkens 1987), but we may also relate it to income and/or education levels.

This research proposal expects to make a contribution to the current discussion on microbusiness and poverty alleviation. The proposed focus on gender and economic community development in colonias should also benefit the design of policies aimed at improving living conditions along the Texas-Mexico border area.