Separate In and Of Itself Can Cause Unequal

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A new study argues that simple economic forces arising from segregation directly create economic inequity, independent of any psychological effects.

The study shows that even when there is no history of discrimination between two groups, social segregation alone can cause dramatic economic inequities to develop.

Rajiv Sethi of Columbia University, Glenn Loury of Brown University in Providence, R.I., and Sam Bowles of the Santa Fe Institute in New Mexico, have created a simple mathematical model for understanding the interaction between segregation and inequality. They imagined a situation in which discrimination that had historically existed between two groups of people came to an end, so that people from both groups who had equal skills subsequently began earning equal wages. The researchers then asked whether, over many generations, the income of the two groups would tend to equalize or whether the disparity would persist.

The model incorporated the idea that parents tend to invest more heavily in giving their children the skills that employers value when they expect that investment to pay off later in higher wages. It also included the fact that children are more likely to succeed when they are surrounded by other children who are succeeding. For example, studies show that having friends with strong vocabularies helps a child to pick up more words with less effort.

“If you have enough integration between the social networks of the two groups, the inequality will go away over generations,” Sethi says, but otherwise, the inequality could get worse, the study shows. “Equal opportunity won’t be enough,” notes Sethi. He presented the team’s results July 7 at PET07, the conference of the Association for Public Economic Theory, in Nashville.

The researchers also performed their mathematical experiment with two segregated groups that began with equal skills and income. The team found that even when the two groups start out equal, some slight discrepancy is bound to develop randomly over time. As soon as that happens, the same dynamics come into play and magnify the inequality, making one group wealthier and more highly skilled and the other group poorer and less skilled.