Racial Discrimination and Competition

59 Pages Posted: 27 Aug 2008 Last revised: 29 Oct 2014

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Alexey Levkov

Brown University - Department of Economics

Yona Rubinstein

Tel Aviv University - Eitan Berglas School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2008

Abstract

This paper assesses the impact of competition on racial discrimination. The dismantling of inter- and intrastate bank restrictions by U.S. states from the mid-1970s to the mid-1990s reduced financial market imperfections, lowered entry barriers facing nonfinancial firms, and boosted the rate of new firm formation. We use bank deregulation to identify an exogenous intensification of competition in the nonfinancial sector, and evaluate its impact on the racial wage gap, which is that component of the black-white wage differential unexplained by Mincerian characteristics. We find that bank deregulation reduced the racial wage gap by spurring the entry of non- financial firms. Consistent with taste-based theories, competition reduced both the racial wage gap and racial segregation in the workplace, particularly in states with a comparatively high degree of racial prejudice, where competition-enhancing bank deregulation eliminated about one-quarter of the racial wage gap after five years.

Suggested Citation

Levine, Ross Eric and Levkov, Alexey and Rubinstein, Yona, Racial Discrimination and Competition (August 2008). NBER Working Paper No. w14273. Available at SSRN: https://ssrn.com/abstract=1248934

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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National Bureau of Economic Research (NBER)

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Alexey Levkov

Brown University - Department of Economics ( email )

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Yona Rubinstein

Tel Aviv University - Eitan Berglas School of Economics ( email )

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Ramat Aviv, Tel Aviv, 69978
Israel
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+972 3 640 9908 (Fax)

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