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

52 Pages Posted: 5 Apr 2013

See all articles by Elizabeth Oltmans Ananat

Elizabeth Oltmans Ananat

Duke University

Shihe Fu

Xiamen University - The Wang Yanan Institute for Studies in Economics (WISE)

Stephen L. Ross

University of Connecticut - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2013

Abstract

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.

Suggested Citation

Ananat, Elizabeth Oltmans and Fu, Shihe and Ross, Stephen L., Race-Specific Agglomeration Economies: Social Distance and the Black-White Wage Gap (April 2013). NBER Working Paper No. w18933. Available at SSRN: https://ssrn.com/abstract=2245442

Shihe Fu

Xiamen University - The Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 361005
China

Stephen L. Ross

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

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