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Information and racial exclusion

  • Shelly Lundberg

    ()

  • Richard Startz

    ()

This paper presents several economic models that explore the relationships between imperfect information, racial income disparities, and segregation. The use of race as a signal arises here, as in models of statistical discrimination, from imperfect information about the return to transactions with particular agents. In a search framework, signaling supports not simply a discriminatory equilibrium, but a pattern of racially segregated transactions, which in turn perpetuates the informational asymmetries. Minority groups necessarily suffer disproportionately from segregation, since the degree to which transactions opportunities are curtailed depends upon group size, as well as the informational “distance” between racial groups. However, in some variants of the model, minority agents will self-segregate since they face an adverse selection of majority agents who are willing to trade with them. We also show that, if agents are able to learn from transactions, racial signaling can emerge with only minimal assumptions about the ex ante importance of race.

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File URL: http://hdl.handle.net/10.1007/s00148-005-0060-9
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Article provided by Springer in its journal Journal of Population Economics.

Volume (Year): 20 (2007)
Issue (Month): 3 (July)
Pages: 621-642

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Handle: RePEc:spr:jopoec:v:20:y:2007:i:3:p:621-642
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  1. Joseph G. Altonji & Charles R. Pierret, . "Employer Learning and Statistical Discrimination," IPR working papers 97-18, Institute for Policy Resarch at Northwestern University.
  2. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  3. Larry Samuelson & George J. Mailath & Avner Shaked, 2000. "Endogenous Inequality in Integrated Labor Markets with Two-Sided Search," American Economic Review, American Economic Association, vol. 90(1), pages 46-72, March.
  4. Rajiv Sethi & Rohini Somanathan, 2004. "Inequality and Segregation," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1296-1321, December.
  5. Marianne Bertrand & Sendhil Mullainathan, 2004. "Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination," American Economic Review, American Economic Association, vol. 94(4), pages 991-1013, September.
  6. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "Residential Segregation in General Equilibrium," Working Papers 885, Economic Growth Center, Yale University.
  7. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  8. Edward P. Lazear, 1995. "Culture and Language," NBER Working Papers 5249, National Bureau of Economic Research, Inc.
  9. Joseph G. Altonji & Rebecca M. Blank, . "Race and Gender in the Labor Market," IPR working papers 98-18, Institute for Policy Resarch at Northwestern University.
  10. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical theories of discrimination in labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
  11. Richard Startz & Lundberg, . "Private Discrimination and Social Intervention in Competitive Labor Markets," Rodney L. White Center for Financial Research Working Papers 19-81, Wharton School Rodney L. White Center for Financial Research.
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