ECONOMIC DISADVANTAGES OF BLACKS IN HIGH BLACK PROPORTION CITIES

Abstract

This paper proposes wage premiums for jobs in high black proportion cities as a source of the continuing economic disadvantages for poor blacks. The estimated hedonic model of individual wages confirms the presence of such wage premiums which result in high labor costs and economic stagnation in a black-concentrated region, while the regional black ratio regression indicates a significant statistical correlation between a region¡¯s black ratio and its disamenities. From the empirical results emerge the following conclusions: First, the equality of the estimated wage premiums for high black ratio between blacks and whites precludes direct prejudice-based discrimination. A caveat, however, is that the full wage premiums are conferred upon workers moving freely across regions in search of better wages and amenities, not applying to the mobility-restricted or the non-employed. Second, the wage premiums for high black ratio, causing economic stagnation of a black- concentrated region, constitute a statistical discrimination against blacks. This is because, given the pre-existing poverty among inner city blacks, the victims of the regional economic decline are mainly those unskilled, poor blacks who suffer non-employment due to inadequate resources for job search and mobility.Wage Premium, Black-concentrated Region, Statistical Discrimination