Two Faces of the ICT Revolution: Desegregation and Minority-Majority Earnings Inequality
AbstractSocial interaction is the primary vehicle through which advancement of information and communication technologies (ICT) affects socio-economic outcomes. In the context of minority-majority relations, social distances and segregation determine the benefits individuals gain from social interaction and from improvement of its efficiency. In the general equilibrium framework, this paper argues that ICT advancement disproportionately increases the efficiency of social interaction in ethnically integrated social networks and that of majority individuals, thereby causing desegregation and increasing interethnic earnings inequality at the same time. The argument thus explains the concurrence of two seemingly contradicting developments in the lives of Black and White Americans since the late 1970s – rising interethnic earnings inequality and desegregation of Blacks. Furthermore, I establish that there is a threshold level of ICT below which all minority individuals prefer segregated neighborhoods and above which some minority individuals choose to integrate, thereby reaping the efficiency benefits of social interaction with the larger society. I interpret the reversal of the segregation trend that occurred in the late 1970s as a consequence of advancement of ICT beyond this threshold level. Finally, I suggest an explanation of why typically no desegregation occurred in extraordinarily segregated areas and in the case of recent immigrants.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1872.
Length: 42 pages
Date of creation: Dec 2005
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Find related papers by JEL classification:
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-09 (All new papers)
- NEP-ICT-2005-12-09 (Information & Communication Technologies)
- NEP-SOC-2005-12-09 (Social Norms & Social Capital)
- NEP-URE-2005-12-09 (Urban & Real Estate Economics)
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