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Information and Racial Exclusion

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  • Lundberg, Shelly

    (University of California, Santa Barbara)

  • Startz, Richard

    (University of Washington)

Abstract

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.

Suggested Citation

  • Lundberg, Shelly & Startz, Richard, 2004. "Information and Racial Exclusion," IZA Discussion Papers 1389, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp1389
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    References listed on IDEAS

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    1. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 313-350.
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    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. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, vol. 73(3), pages 340-347, June.
    7. Rajiv Sethi & Rohini Somanathan, 2004. "Inequality and Segregation," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1296-1321, December.
    8. Altonji, Joseph G. & Blank, Rebecca M., 1999. "Race and gender in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 48, pages 3143-3259, Elsevier.
    9. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
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    Cited by:

    1. Houy, Nicolas, 2006. "Exclusion by cognitive limitation," Economics Letters, Elsevier, vol. 90(3), pages 317-320, March.
    2. Anthony Edo & Nicolas Jacquemet & Constantine Yannelis, 2019. "Language skills and homophilous hiring discrimination: Evidence from gender and racially differentiated applications," Review of Economics of the Household, Springer, vol. 17(1), pages 349-376, March.
    3. Catherine Bros, 2008. "Power distribution and endogenous segregation," Post-Print halshs-00204974, HAL.
    4. Harbaugh, Rick & To, Ted, 2014. "Opportunistic discrimination," European Economic Review, Elsevier, vol. 66(C), pages 192-204.
    5. Yuki, Kazuhiro, 2012. "Stereotypes, segregation, and ethnic inequality," MPRA Paper 39704, University Library of Munich, Germany.
    6. James Fain, 2016. "Screening Discrimination in a Broader Context," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 23(4), pages 276-294, October.
    7. Borooah, Vani & Myers, Samuel, 2014. "Discriminatory Behaviour: Issues Related to Theory and Measurement," MPRA Paper 75712, University Library of Munich, Germany.
    8. Osiris Jorge, Parcero & Adolfo, Cristobal-Campoamor, 2009. "Dynamics of neighborhood formation and segregation by income," MPRA Paper 16936, University Library of Munich, Germany.
    9. Catherine Bros, 2008. "Power distribution and endogenous segregation," Documents de travail du Centre d'Economie de la Sorbonne bla08002, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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    More about this item

    Keywords

    imperfect information; discrimination; segregation; race; search;
    All these keywords.

    JEL classification:

    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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