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Racial Discrimination and Competition

  • Ross Levine
  • Alexey Levkov
  • Yona Rubinstein

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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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
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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