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Labor Market Discrimination and Capital Investment: The Effects of Fan Discrimination on Stadium Investment

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Author Info

  • Bodvarsson, Örn B.

    ()
    (St. Cloud State University)

  • Humphreys, Brad R.

    ()
    (University of Alberta)

Abstract

We investigate the possibility that labor market discrimination affects economic outcomes in the complementary capital market. Previous research contains ample theoretical justification, and empirical evidence, that discrimination affects wages and employment in labor markets. However, the effects of discrimination against minority labor on transactions in markets for other inputs used in production are not known. We develop a model of the optimal capital stock put in place in the presence of customer discrimination and test this model using data on sports facility construction over the period 1950-2004. The empirical evidence suggests that teams in cities with more racial segregation spend less on sports facilities, confirming the predictions of the model about the effect of customer discrimination on capital investment.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4551.

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Length: 25 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4551

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Keywords: racial discrimination; capital stock; complementarity; stadium financing;

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  1. Peter A. Groothuis & J. Richard Hill, 2004. "Exit Discrimination in the NBA: A Duration Analysis of Career Length," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 341-349, April.
  2. Lawrence M. Kahn, 1991. "Discrimination in professional sports: A survey of the literature," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(3), pages 395-418, April.
  3. Dennis Coates, 2007. "Stadiums And Arenas: Economic Development Or Economic Redistribution?," Contemporary Economic Policy, Western Economic Association International, vol. 25(4), pages 565-577, October.
  4. Cutler, David & Vigdor, Jacob & Glaeser, Edward, 1999. "The Rise and Decline of the American Ghetto," Scholarly Articles 2770033, Harvard University Department of Economics.
  5. Bodvarsson, Orn B. & Partridge, Mark D., 2001. "A supply and demand model of co-worker, employer and customer discrimination," Labour Economics, Elsevier, vol. 8(3), pages 389-416, June.
  6. Stefan Szymanski, 2000. "A Market Test for Discrimination in the English Professional Soccer Leagues," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 590-603, June.
  7. J. Brian O'Roark, 2001. "Capital Structure and Team Performance in Professional Baseball," Journal of Sports Economics, , vol. 2(2), pages 168-180, May.
  8. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226041162, March.
  9. Chirinko, Robert S, 1993. "Business Fixed Investment Spending: Modeling Strategies, Empirical Results, and Policy Implications," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1875-1911, December.
  10. Brian L. Goff & Robert E. McCormick & Robert D. Tollison, 2002. "Racial Integration as an Innovation: Empirical Evidence from Sports Leagues," American Economic Review, American Economic Association, vol. 92(1), pages 16-26, March.
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