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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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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. Kpodar, Kangni & Singh, Raju Jan, 2011. "Does financial structure matter for poverty ? evidence from developing countries," Policy Research Working Paper Series 5915, The World Bank.
  3. Xuelong Wang, 2012. "Financial Development and Rural-Urban Inequality: Evidence from China," Economics Bulletin, AccessEcon, vol. 32(2), pages 1625-1639.
  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 R. Kerr & Ramana Nanda, 2009. "Banking Deregulations, Financing Constraints and Firm Entry Size," Harvard Business School Working Papers 10-010, Harvard Business School, revised Oct 2009.
  7. Francois, Patrick & van Ypersele, Tanguy, 2009. "Doux Commerces: Does Market Competition Cause Trust?," CEPR Discussion Papers 7368, C.E.P.R. Discussion Papers.
  8. Kerr, William R. & Nanda, Ramana, 2009. "Democratizing entry: Banking deregulations, financing constraints, and entrepreneurship," Journal of Financial Economics, Elsevier, vol. 94(1), pages 124-149, October.
  9. Aparicio Fenoll, Ainhoa, 2011. "The Effect of Product Market Competition on Job Instability," IZA Discussion Papers 5669, Institute for the Study of Labor (IZA).
  10. Alexey Levkov, 2010. "Branching of banks and union decline," Risk and Policy Analysis Unit Working Paper QAU10-7, Federal Reserve Bank of Boston.
  11. Chatterji, Aaron K. & Seamans, Robert C., 2012. "Entrepreneurial finance, credit cards, and race," Journal of Financial Economics, Elsevier, vol. 106(1), pages 182-195.
  12. Zimmerman, Seth D., 2011. "The Returns to Four-Year College for Academically Marginal Students," IZA Discussion Papers 6107, Institute for the Study of Labor (IZA).

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