Journal of Population Economics

, Volume 20, Issue 3, pp 621–642 | Cite as

Information and racial exclusion

Original Paper

Abstract

We present several economic models of racial segregation and income inequality. The use of race as a signal arises from imperfect information about the return to transactions with particular agents. In a search framework, signaling supports not simply a discriminatory equilibrium, but a pattern of racially segregated transactions, which in turn perpetuates the informational asymmetries. Equilibrium income disparities depend on the relative size of the minority group and on the informational “distance” between races. Under some circumstances, minority agents will self-segregate since they face an adverse selection of majority agents who are willing to trade with them.

Keywords

Discrimination Race Inequality Imperfect information 

JEL Classification

J15 J71 D83 

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Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of WashingtonSeattleUSA

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