Discrimination, Segregation, Integration, and Expropriation

Abstract

I look at simple models of segregation and integration in a regional economy using a standard Cobb-Douglas production function and show that White capital does better in integration and White labor does better in segregation. I suggest that White capital and labor can resolve this difference in interests by integrating Black labor and expropriating some of the wages of these Black workers. I then introduce the third production factor of human capital, where the ethnic groups have different access to resources for human capital development. I show that this can lead to outcomes very similar to the expropriation model. Both the expropriation and limited human capital models appear to match available data for some US labor markets in the 1865-1965 period.