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The Economics of Identity and the Endogeneity of Race

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  • Howard Bodenhorn
  • Christopher S. Ruebeck

Abstract

Economic and social theorists have modeled race and ethnicity as a form of personal identity produced in recognition of the costliness of adopting and maintaining a specific identity. These models of racial and ethnic identity recognize that race and ethnicity is potentially endogenous because racial and ethnic identities are fluid. We look at the free African-American population in the mid-nineteenth century to investigate the costs and benefits of adopting alternative racial identities. We model the choice as an extensive-form game, where whites choose to accept or reject a separate mulatto identity and mixed race individuals then choose whether or not to adopt that mulatto identity. Adopting a mulatto identity generates pecuniary gains, but imposes psychic costs. Our empirical results imply that race is contextual and that there was a large pecuniary benefit to adopting a mixed-race identity.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9962.

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Date of creation: Sep 2003
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Handle: RePEc:nbr:nberwo:9962

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  1. Francine D. Blau & John W. Graham, 1990. "Black-White Differences in Wealth and Asset Composition," NBER Working Papers 2898, National Bureau of Economic Research, Inc.
  2. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
  3. Darity, William Jr. & Mason, Patrick L. & Stewart, James B., 2006. "The economics of identity: The origin and persistence of racial identity norms," Journal of Economic Behavior & Organization, Elsevier, vol. 60(3), pages 283-305, July.
  4. Conley, Timothy G. & Galenson, David W., 1998. "Nativity and Wealth in Mid-Nineteenth-Century Cities," The Journal of Economic History, Cambridge University Press, vol. 58(02), pages 468-493, June.
  5. Joseph G. Altonji & Ulrich Doraszelski & Lewis Segal, 2000. "Black/white differences in wealth," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 38-50.
  6. Howard Bodenhorn, 2002. "The Complexion Gap: The Economic Consequences of Color among Free African Americans in the Rural Antebellum South," NBER Working Papers 8957, National Bureau of Economic Research, Inc.
  7. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
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