Friday, March 18, 2011

INSEAD Working Paper 2011/31/EPS

This paper shows that the mortgage credit boom has significantly affected urban and school racial segregation from 1995 to 2007. We develop a model of urban segregation with credit constraints that shows that easier credit can either increase or decrease segregation, depending on the race of the marginal consumer who benefits from the expansion of credit. We then use the annual racial demographics of each of the approximately 90,000 public schools in the United States from 1995 to 2007, matched to a national comprehensive dataset of mortgage originations, linked to the neighbourhood of the house, to show that higher leverage increases the segregation of African American and Hispanic students. Both segregation across schools and across school districts are higher when the leverage is higher. Higher leverage allows households to avoid interracial contact.

OUAZAD Amine, PAGE Lionel
INSEAD Working Paper 2011/34/EPS

We put forward a new experimental economics design with monetary incentives to estimate people’s perceptions of discrimination in a variety of contexts. We apply the design to estimate students’ perceptions of teachers: Students were given an endowment to bet on their own performance on a written verbal test, either when assessed non anonymously by their teacher, in a random half of the classroom, or when assessed anonymously by an external examiner. 1,200 British students in grade 8 classrooms across 29 schools took part. Female students invested more when assessed by a male teacher, and male students invested less when assessed by a female teacher. Interestingly, female students’ perceptions are not in line with actual discrimination: Teachers tend to give better grades to students of their own gender. Ethnicity and socioeconomic status did not play a role and do not explain the gender effect.

INSEAD Working Paper 2011/37/EPS 

This paper shows that information plays a key role in the coordination of white households’ forward-looking expectations to leave an area in response to the entry of minority households. First, from the 1940s to the 1970s, real estate brokers earned substantial commission fees during white flight to the suburbs. Real estate agents, who have asymmetric information on potential buyers, have an incentive to strategically disclose information on potential minority buyers, to trigger white flight and increase profits. The prohibition of this type of disclosure in the 1968 Civil Rights Act is shown to increase white welfare and prevent the entry of black households. Second, households’ behavior – whether to stay or leave – provides other households with information about potential buyers. Baltimore and Philadelphia prohibited “Sold” signs to stem white flight.Prohibiting “Sold” signs benefits whites with strong racial preferences and hurts whites with weak racial preferences.