Are black communities truly underserved? An analysis of retail and professional services in the Atlanta metropolitan area

This paper investigates whether or not the racial composition of a neighborhood has a measurable influence on retail firm location. The study addresses the growing concern among blacks, particularly middle-class blacks, that their communities are generally underserved by retail establishments. The focus of this analysis is on the seven county area that comprise the Atlanta metropolitan region. Information was collected on twenty-eight major service sectors. A simultaneous equations model with censored endogenous variables is estimated using a maximum likelihood procedure.;The null hypothesis that race does not play a role in the location decision of "localized" firms must be rejected are least in part since empirical results clearly indicate that there are instances where race does seem to matter. In the cases of bookstores, diet and weight reduction services, funeral services and crematories, and movie theaters it appears that black neighborhoods are underserved. Based on cost factors, demographics, and purchasing power it appears that black communities warrant a much higher level of service from these sectors. In addition, the results suggest--at least in regards to grocery stores and eating places--that the quality of services provided in the black community may also be a problem.;Another outcome of this study that seems to undercut the null hypothesis is the unanticipated, but no less significant, result that a number of businesses were actually overserving the black community. In most of these instances the businesses involved could be considered to be nuisance activities. Moreover, on balance it seems that overservedness of nuisance activities presents more of a problem to the black community then does the underservedness on the part of desirable services.;Although the preponderance of evidence supports the conclusion that Black neighborhoods are being discriminated against by certain retailers, there are some instances where the evidence does not seem to fit. As a result, this conclusion is tempered by the realization that other influencing factors could be at work.