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Information and Racial Exclusion

  • Lundberg, Shelly

    ()

    (University of California, Santa Barbara)

  • Startz, Richard

    ()

    (University of Washington)

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://ftp.iza.org/dp1389.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1389.

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Length: 37 pages
Date of creation: Nov 2004
Date of revision:
Publication status: published in: Journal of Population Economics, 2007, 20 (3), 621 - 642
Handle: RePEc:iza:izadps:dp1389
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  1. 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.
  2. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  3. George J. Mailath & Larry Samuelson & Avner Shaked, . "Endogenous Inequality in Integrated Labor Markets with Two-sided Search," Penn CARESS Working Papers 90ff654ed11b714e3f7530c57, Penn Economics Department.
  4. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer Learning and Statistical Discrimination," NBER Working Papers 6279, National Bureau of Economic Research, Inc.
  5. Rajiv Sethi & Rohini Somanathan, 2001. "Inequality and Segregation," Microeconomics 0108005, EconWPA.
  6. 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.
  7. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "Residential Segregation in General Equilibrium," Working Papers 885, Economic Growth Center, Yale University.
  8. Edward P. Lazear, 1999. "Culture and Language," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S95-S126, December.
  9. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  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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