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Racial prejudice and labour market penalties during economic downturns

David Johnston () and Grace Lordan ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Do economic downturns encourage racist attitudes? Does this in-turn lead to worse labour market outcome for minorities? We assess these important questions using British attitude and labour force data. The attitude data show that racial prejudice is countercyclical, with the effect driven by large increases for high-skilled middle-aged working men – a 1%-point increase in unemployment is estimated to increase self-reported racial prejudice by 4%-points. Correspondingly, the labour force data show that racial employment and wage gaps are counter-cyclical, with the largest effects also observed for high-skilled men, especially in the manufacturing and construction industries – a 1%-point increase in unemployment is estimated to increase the wage gap by 3%. These results are entirely consistent with the theoretical literature, which proposes that racial prejudice and discrimination are the result of labour market competition among individuals with similar traits, and that the effects of this competition are exacerbated during periods of economic downturn.

Keywords: prejudice; recessions; racism; discrimination (search for similar items in EconPapers)
JEL-codes: J01 J70 J71 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pke and nep-ure
Date: 2016
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Published in European Economic Review, 2016, 84, pp. 57-75. ISSN: 0014-2921

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