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Abstract for:

Racial Discrimination and Competition

Ross  Levine,  Alexey  Levkov,  Yona  Rubinstein,  August 2011
Paper No' CEPDP1069: | Full paper (pdf)
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Keywords: Discrimination; imperfect competition, banks, regulation

JEL Classification: J7; J31; D43; D3; G21; G28

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
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We provide the first assessment of whether an intensification of product market competition reduces the racial wage gap exactly where taste-based theories predict that competition will reduce labor market discrimination. in economies where employers have strong racial prejudices. We use bank deregulation across the U.S. states to identify an intensification of competition among banks, which in turn lowered entry barriers facing nonfinancial firms, especially firms that depend heavily on bank credit. Consistent with taste-based theories, we find that competition boosted blacks’ relative residual wages within the banking industry and bank-dependent industries, but only in states with strong tastes for discrimination.