Labor Market Discrimination and Capital Investment: The Effects of Fan Discrimination on Stadium Investment

25 Pages Posted: 17 Nov 2009

See all articles by Orn B. Bodvarsson

Orn B. Bodvarsson

Saint Cloud State University; IZA Institute of Labor Economics

Brad R. Humphreys

West Virginia University - Department of Economics

Abstract

We investigate the possibility that labor market discrimination affects economic outcomes in the complementary capital market. Previous research contains ample theoretical justification, and empirical evidence, that discrimination affects wages and employment in labor markets. However, the effects of discrimination against minority labor on transactions in markets for other inputs used in production are not known. We develop a model of the optimal capital stock put in place in the presence of customer discrimination and test this model using data on sports facility construction over the period 1950-2004. The empirical evidence suggests that teams in cities with more racial segregation spend less on sports facilities, confirming the predictions of the model about the effect of customer discrimination on capital investment.

Keywords: racial discrimination, capital stock, complementarity, stadium financing

JEL Classification: J15

Suggested Citation

Bodvarsson, Orn B. and Humphreys, Brad R., Labor Market Discrimination and Capital Investment: The Effects of Fan Discrimination on Stadium Investment. IZA Discussion Paper No. 4551. Available at SSRN: https://ssrn.com/abstract=1506303

Orn B. Bodvarsson (Contact Author)

Saint Cloud State University ( email )

Saint Cloud, MN 56301
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Brad R. Humphreys

West Virginia University - Department of Economics ( email )

Morgantown, WV 26506
United States

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