Race and red tape

The Economist
Nov 13th 2008
From The Economist print edition
One unsung benefit of financial deregulation is greater colour-blindness

THIS is a bad moment for financial deregulation in America and a good one for race relations. Yet might the two be connected? New research* by a trio of academics at Brown University shows that when American states liberalised their uncompetitive banking markets between the mid-1970s and 1994, one of the little-noticed side effects was a reduced wage gap between blacks and whites.
It has been widely documented that black workers in America earn less than their white peers, partly because the average black worker has less education and experience than his white counterpart. But even after stripping out all observable differences between workers, there remains an unexplained shortfall in the wages of black workers compared with white ones. Economists call this the “racial wage gap”.
At least some of this appears to be because of bias. A recent paper† has documented that American firms are one-and-a-half times as likely to interview a person they think is white than one they think is black, even if both have identical qualifications. To reduce this bias, there are common responses such as affirmative-action policies and education. Since Gary Becker, a Nobel-prize winning economist, wrote “The Economics of Discrimination” in 1957, the role of competition has also been central to economists’ thinking about how to ease discrimination at work. [Full story:
http://www.economist.com/finance/displaystory.cfm?story_id=12597512