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Race-Specific Agglomeration Economies: Social Distance and the Black-White Wage Gap

  • Elizabeth Ananat
  • Shihe Fu
  • Stephen L. Ross

We present evidence that benefits from agglomeration concentrate within race. Cross-sectionally, the black-white wage gap increases by 2.5% for every million-person increase in urban population. Within cities, controlling for unobservable productivity through residential-tract-by-demographic indicators, blacks’ wages respond less than whites’ to surrounding economic activity. Individual wage returns to nearby employment density and human capital rise with the share of same-race workers. Manufacturing firms’ productivity rises with nearby activity only when they match nearby firms racially. Weaker cross-race interpersonal interactions are a plausible mechanism, as blacks in all-white workplaces report less closeness to whites than do even whites in all-nonwhite workplaces.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18933.

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Date of creation: Apr 2013
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Handle: RePEc:nbr:nberwo:18933
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