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

Örn B. Bodvarsson () and Brad Humphreys
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Örn B. Bodvarsson: Retired

No 4551, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: complementarity; capital stock; racial discrimination; stadium financing (search for similar items in EconPapers)
JEL-codes: J15 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2009-11
New Economics Papers: this item is included in nep-lab, nep-spo and nep-ure
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Citations: View citations in EconPapers (1)

Published - published as 'Labor Market Discrimination and Capital Investment: The Effects of Fan Discrimination on Stadium and Arena Construction' in: Contemporary Economic Policy, 2013, 31 (3), 604 - 617

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