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Racial Discrimination and Competition

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  • Ross Levine
  • Alexey Levkov
  • Yona Rubinstein

Abstract

We provide the first assessment of whether an intensification of product market competition reduces the racial wage gap exactly where taste-based theories predict that competition will reduce labor market discrimination. in economies where employers have strong racial prejudices. We use bank deregulation across the U.S. states to identify an intensification of competition among banks, which in turn lowered entry barriers facing nonfinancial firms, especially firms that depend heavily on bank credit. Consistent with taste-based theories, we find that competition boosted blacks' relative residual wages within the banking industry and bank-dependent industries, but only in states with strong tastes for discrimination.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1069.

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Date of creation: Aug 2011
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Handle: RePEc:cep:cepdps:dp1069

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: Discrimination; imperfect competition; banks; regulation;

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References

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Citations

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Cited by:
  1. Asli Demirg��-Kunt & Ross Levine, 2009. "Finance and Inequality: Theory and Evidence," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 287-318, November.
  2. William R. Kerr & Ramana Nanda, 2010. "Banking Deregulations, Financing Constraints, and Firm Entry Size," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 582-593, 04-05.
  3. Chatterji, Aaron K. & Seamans, Robert C., 2012. "Entrepreneurial finance, credit cards, and race," Journal of Financial Economics, Elsevier, vol. 106(1), pages 182-195.
  4. Demirguc-Kunt, Asli & Levine, Ross, 2008. "Finance and economic opportunity," Policy Research Working Paper Series 4468, The World Bank.
  5. Thorsten Beck & Patrick Behr & Andreas Madestam, 2011. "Sex and Credit: Is There a Gender Bias in Lending?," Working Papers 411, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. William Kerr & Ramana Nanda, 2006. "Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship," Harvard Business School Working Papers 07-033, Harvard Business School, revised Oct 2008.
  7. Aparicio Fenoll, Ainhoa, 2011. "The Effect of Product Market Competition on Job Instability," IZA Discussion Papers 5669, Institute for the Study of Labor (IZA).
  8. Alexey Levkov, 2010. "Branching of banks and union decline," Risk and Policy Analysis Unit Working Paper QAU10-7, Federal Reserve Bank of Boston.
  9. Francois, Patrick & van Ypersele, Tanguy, 2009. "Doux Commerces: Does Market Competition Cause Trust?," CEPR Discussion Papers 7368, C.E.P.R. Discussion Papers.

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