Market Competition, Consumer Discrimination, and Public Accommodations: Evidence From Green Books

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This award funds research that will make innovative use of archival data to test an important economic theory. The research includes creating a new data set that will be available to an interdisciplinary group of scholars to study a wide variety of socioeconomic issues in rural and urban areas of the United States. The project makes use of an important historical tool used by African Americans in navigating segregation in the Jim Crow era: The Negro Motorist Green Books. From 1936 to 1964, these directories listed hotels, businesses, restaurants, and other public accommodations that were friendly towards African American clients during a time when travel could be uncomfortable, at best, and dangerous, at worst. It will leverage a new, complete digitization and geocoding of Green Book establishments and other new data sets to examine how changing preferences of consumers influenced the number of non-discriminatory businesses before the Civil Rights Act of 1964 barred racial discrimination in public accommodations. The research team will create a unique county-level dataset and will use the data to test theories economic theories of how market competition is affected by discrimination and racial segregation. This project advances important societal goals by helping us understand whether and how business competition will result in equitable access to public accommodations. Due to a relative sparsity of data, little is known about the economics and proximate determinants of segregation of public accommodations or the propensity for businesses to discriminate. Traditional models of taste-based discrimination (e.g., Becker, 1971) suggest that competition will drive down the market share of discriminatory firms even in the absence of government intervention. If non-minority clients have a disutility from soliciting non-discriminatory businesses, however, there is a stable equilibrium of discriminatory firms that does not change over time. The research team builds and analyzes a stylized model that captures the nature of the relationship between the share of firms that serve members of the minority group and that group's share of the population. The model predicts that the number of discriminatory firms is decreasing in the share of the minority population. To test the model’s implications, the team will create a unique county-level data set of Green Book establishment counts to proxy for the number of non-discriminatory firms and then exploit exogenous shocks to the white prime-aged population caused by World War II mortality to see if changing consumer demographics are related to the number of non-discriminatory firms. Consistent with the notion that discrimination on the part of white consumers provided firms with incentives to discriminate, preliminary results show that counties with the highest number of white casualties in WWII had larger increases in the share of non-discriminatory firms. The completed project will advance our understanding of the theory and empirical evidence of discrimination and racial segregation.This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.