Information and Racial Exclusion

Shelly Lundberg and Richard Startz

No 1389, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper presents several economic models that explore the relationships between imperfect information, racial income disparities, and segregation. The use of race as a signal arises here, as in models of statistical discrimination, 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. Minority groups necessarily suffer disproportionately from segregation, since the degree to which transactions opportunities are curtailed depends upon group size, as well as the informational “distance” between racial groups. However, in some variants of the model, minority agents will self-segregate since they face an adverse selection of majority agents who are willing to trade with them. We also show that, if agents are able to learn from transactions, racial signaling can emerge with only minimal assumptions about the ex ante importance of race.

Keywords: imperfect information; discrimination; segregation; race; search (search for similar items in EconPapers)
JEL-codes: D83 J7 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2004-11
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published in: Journal of Population Economics, 2007, 20 (3), 621 - 642

Downloads: (external link)
https://docs.iza.org/dp1389.pdf (application/pdf)

Related works:
Journal Article: Information and racial exclusion (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp1389

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().