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Racial Discrimination and Competition

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  • Ross Levine
  • Alexey Levkov
  • Yona Rubinstein

Abstract

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.

Suggested Citation

  • Ross Levine & Alexey Levkov & Yona Rubinstein, 2011. "Racial Discrimination and Competition," CEP Discussion Papers dp1069, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1069
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    More about this item

    Keywords

    Discrimination; imperfect competition; banks; regulation;
    All these keywords.

    JEL classification:

    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D3 - Microeconomics - - Distribution
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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