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The Economics of 'Acting White'

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  • David Austen-Smith
  • Roland G. Fryer

Abstract

This paper formalizes a sociological phenomenon entitled 'acting white'. The key idea is that individuals face a tension between signaling their type to the outside labor market and signaling their type to a peer group: signals that induce high wages can be signals that induce peer rejection. We prove three basic results: (1) there exists no equilibria in which all types of individuals adopt distinct educational investment levels; (2) when individuals are not too patient, all equilibria satisfying a standard refinement involve a binary partition of the type space in which all types accepted by the group pool on a common low education level and all types rejected by the group separate at distinctly higher levels of education with correspondingly higher wages; and (3) when individuals are very patient, there is an increase in the variation of education levels within the group and an increase in the variance of types deemed acceptable by the group. The more those involved discount the future, the more salient peer pressure becomes and the more homogenous groups become.

Suggested Citation

  • David Austen-Smith & Roland G. Fryer, 2003. "The Economics of 'Acting White'," NBER Working Papers 9904, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9904
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    References listed on IDEAS

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    1. Assar Lindbeck & Sten Nyberg & Jörgen W. Weibull, 1999. "Social Norms and Economic Incentives in the Welfare State," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 1-35.
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    3. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
    4. David Austen-Smith, 2002. "Peer Pressure and Job Market Signaling," Discussion Papers 1352, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
    6. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-877, October.
    7. Cho, In-Koo & Sobel, Joel, 1990. "Strategic stability and uniqueness in signaling games," Journal of Economic Theory, Elsevier, vol. 50(2), pages 381-413, April.
    8. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-661, May.
    9. Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-359, March.
    10. George A. Akerlof, 1980. "A Theory of Social Custom, of which Unemployment may be One Consequence," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 749-775.
    11. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    12. Roland G. Fryer & Steven D. Levitt, 2004. "Understanding the Black-White Test Score Gap in the First Two Years of School," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 447-464, May.
    13. George Akerlof, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 599-617.
    14. Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
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    Citations

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    Cited by:

    1. Roland G. Fryer & Steven D. Levitt, 2004. "The Causes and Consequences of Distinctively Black Names," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 767-805.
    2. Harris Selod & Yves Zenou, 2006. "City Structure, Job Search and Labour Discrimination: Theory and Policy Implications," Economic Journal, Royal Economic Society, vol. 116(514), pages 1057-1087, October.
    3. Kaushik Basu, 2005. "Racial conflict and the malignancy of identity," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 3(3), pages 221-241, December.
    4. Antecol, Heather & Cobb-Clark, Deborah A., 2008. "Identity and racial harassment," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 529-557, June.
    5. Roland G. Fryer, Jr. & Paul Torelli, 2005. "An Empirical Analysis of 'Acting White'," NBER Working Papers 11334, National Bureau of Economic Research, Inc.
    6. Liuba Kogan Cogan & Joanna Kámiche Zegarra & Patricia Lay Ferrato, 2011. "¿El origen socioeconómico y la raza pagan? Un estudio interdisciplinario sobre la discriminación racial y socioeconómica en el ámbito empresarial limeño”. El caso de los egresados de la Universidad de," Working Papers 11-17, Centro de Investigación, Universidad del Pacífico.
    7. Roland G. Fryer, Jr, 2010. "The Importance of Segregation, Discrimination, Peer Dynamics, and Identity in Explaining Trends in the Racial Achievement Gap," NBER Working Papers 16257, National Bureau of Economic Research, Inc.
    8. Dohmen, Thomas, 2005. "Social Pressure Influences Decisions of Individuals: Evidence from the Behavior of Football Referees," IZA Discussion Papers 1595, Institute for the Study of Labor (IZA).
    9. Neal, Derek, 2006. "Why Has Black-White Skill Convergence Stopped?," Handbook of the Economics of Education, Elsevier.
    10. David Austen-Smith & Ronald G. Fryer, 2005. "An Economic Analysis of 'Acting White'," Discussion Papers 1399, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J0 - Labor and Demographic Economics - - General

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