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Information and racial exclusion

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  • Shelly Lundberg

    ()

  • Richard Startz

    ()

Abstract

This paper presents several economic models that explore the relationships between imperfect information, racial income disparities, and segregation. The use of race as a signal arises here, as in models of statistical discrimination, from imperfect information about the return to transactions with particular agents. In a search framework, signaling supports not simply a discriminatory equilibrium, but a pattern of racially segregated transactions, which in turn perpetuates the informational asymmetries. Minority groups necessarily suffer disproportionately from segregation, since the degree to which transactions opportunities are curtailed depends upon group size, as well as the informational “distance” between racial groups. However, in some variants of the model, minority agents will self-segregate since they face an adverse selection of majority agents who are willing to trade with them. We also show that, if agents are able to learn from transactions, racial signaling can emerge with only minimal assumptions about the ex ante importance of race.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Springer in its journal Journal of Population Economics.

Volume (Year): 20 (2007)
Issue (Month): 3 (July)
Pages: 621-642

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Handle: RePEc:spr:jopoec:v:20:y:2007:i:3:p:621-642

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Related research

Keywords: Discrimination; Race; Inequality; Imperfect information; J15; J71; D83;

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References

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  1. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical theories of discrimination in labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
  2. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  3. George J. Mailath & Larry Samuelson & Avner Shaked, . "Endogenous Inequality in Integrated Labor Markets with Two-sided Search," Penn CARESS Working Papers 90ff654ed11b714e3f7530c57, Penn Economics Department.
  4. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, vol. 73(3), pages 340-47, June.
  5. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer learning and statistical discrimination," Working Paper Series, Macroeconomic Issues WP-97-11, Federal Reserve Bank of Chicago.
  6. Rajiv Sethi & Rohini Somanathan, 2004. "Inequality and Segregation," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1296-1321, December.
  7. Joseph G. Altonji & Rebecca M. Blank, . "Race and Gender in the Labor Market," IPR working papers 98-18, Institute for Policy Resarch at Northwestern University.
  8. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  9. Patrick Bayer & Robert McMillan & Kim Rueben, 2005. "Residential Segregation in General Equilibrium," NBER Working Papers 11095, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Houy, Nicolas, 2006. "Exclusion by cognitive limitation," Economics Letters, Elsevier, vol. 90(3), pages 317-320, March.
  2. Osiris Jorge, Parcero & Adolfo, Cristobal-Campoamor, 2009. "Dynamics of neighborhood formation and segregation by income," MPRA Paper 16936, University Library of Munich, Germany.
  3. Harbaugh, Rick & To, Ted, 2014. "Opportunistic discrimination," European Economic Review, Elsevier, vol. 66(C), pages 192-204.

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