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Retail Redlining: Are Gasoline Prices Higher In Poor And Minority Neighborhoods?

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  • CAITLIN KNOWLES MYERS
  • GRACE CLOSE
  • LAURICE FOX
  • JOHN WILLIAM MEYER
  • MADELINE NIEMI

Abstract

Higher retail prices are frequently cited as a cost of living in poor, minority neighborhoods. However, the empirical evidence, which primarilycomes from the grocery gap literature on food prices, has been mixed. This study uses new data on retail gasoline prices in three major U.S.cities to provide evidence on the relationship between neighborhood characteristics and consumer prices. We find that gasoline prices do not varygreatly with neighborhood racial composition, but that prices are higher in poor neighborhoods. For a 10 percentage point increase in the percentof families with incomes below the poverty line relative to families with incomes between 1 and 2 times the poverty line, retail gasoline prices are estimated to increase by an average of 0.70 percent. This differential is reduced to 0.22 percent once we add controls for costs, competition, and demand. Finally, we provide evidence that the remaining, small, price differential for poor neighborhoods is likely the result of traditional price discrimination in response to less competition and/or more inelastic demand in these locations.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 49 (2011)
Issue (Month): 3 (07)
Pages: 795-809

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Handle: RePEc:bla:ecinqu:v:49:y:2011:i:3:p:795-809

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  1. Kaufman, Phillip R. & MacDonald, James M. & Lutz, Steve M. & Smallwood, David M., 1997. "Do the Poor Pay More for Food? Item Selection and Price Differences Affect Low-Income Household Food Costs," Agricultural Economics Reports, United States Department of Agriculture, Economic Research Service 34065, United States Department of Agriculture, Economic Research Service.
  2. Myers, Caitlin Knowles, 2004. "Discrimination and neighborhood effects: understanding racial differentials in US housing prices," Journal of Urban Economics, Elsevier, vol. 56(2), pages 279-302, September.
  3. Jan Ondrich & Stephen Ross & John Yinger, 2001. "Now You See it, Now You Don't: Why Do Real Estate Agents Withhold Available Houses from Black Customers?," Working papers, University of Connecticut, Department of Economics 2001-01, University of Connecticut, Department of Economics, revised Aug 2002.
  4. John List, 2004. "The nature and extent of discrimination in the marketplace: Evidence from the field," Natural Field Experiments, The Field Experiments Website 00299, The Field Experiments Website.
  5. Chouinard, Hayley & Perloff, Jeffrey M., 2004. "Incidence of federal and state gasoline taxes," Economics Letters, Elsevier, Elsevier, vol. 83(1), pages 55-60, April.
  6. Lashawn Hayes, 2000. "Do the poor pay more? An Empirical Investigation of Price Dispersion in Food Retailing," Working Papers, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing. 974, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing..
  7. repec:fth:prinin:446 is not listed on IDEAS
  8. Goldberg, Pinelopi Koujianou, 1996. "Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(3), pages 622-54, June.
  9. Lashawn Richburg Hayes, 2000. "Do the Poor Pay More? An Empirical Investigation of Price Dispersion in Food Retailing," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 825, Princeton University, Department of Economics, Industrial Relations Section..
  10. Ayres, Ian & Siegelman, Peter, 1995. "Race and Gender Discrimination in Bargaining for a New Car," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 304-21, June.
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Cited by:
  1. Yelowitz, Aaron & Scott, Frank & Beck, Jason, 2011. "The market for real estate brokerage services in low- and high-income neighborhoods: A 6 city study," MPRA Paper 35608, University Library of Munich, Germany.

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