| By: |
Martin Kahanec (IZA Bonn) |
| Abstract: |
Social interaction is the primary vehicle through which advancement of
information and communication technologies (ICT) affects socio-economic
outcomes. In the context of minority-majority relations, social distances and
segregation determine the benefits individuals gain from social interaction
and from improvement of its efficiency. In the general equilibrium framework,
this paper argues that ICT advancement disproportionately increases the
efficiency of social interaction in ethnically integrated social networks and
that of majority individuals, thereby causing desegregation and increasing
interethnic earnings inequality at the same time. The argument thus explains
the concurrence of two seemingly contradicting developments in the lives of
Black and White Americans since the late 1970s - rising interethnic earnings
inequality and desegregation of Blacks. Furthermore, I establish that there is
a threshold level of ICT below which all minority individuals prefer
segregated neighborhoods and above which some minority individuals choose to
integrate, thereby reaping the efficiency benefits of social interaction with
the larger society. I interpret the reversal of the segregation trend that
occurred in the late 1970s as a consequence of advancement of ICT beyond this
threshold level. Finally, I suggest an explanation of why typically no
desegregation occurred in extraordinarily segregated areas and in the case of
recent immigrants. |
| Keywords: |
segregation, earnings inequality, minority, social interaction, ICT revolution, migration |
| JEL: |
J15 J71 O15 O33 |
| Date: |
2005–12 |
| URL: |
http://d.repec.org/n?u=RePEc:iza:izadps:dp1872&r=ict |