The larger the city, the larger the racial wage gap, according to researchers Elizabeth Ananat, Shihe Fu and Stephen L. Ross, whose findings were recently by the National Bureau of Economic Research.
"The average racial gap in metropolitan areas of around one million people – and you can think of a place like Tulsa, Okla. – is about 20 percent smaller than the gap in the nation's largest metro areas of Chicago, L.A. and New York," said Ananat in an interview.
Ananat's research suggests that the racial gap is not directly the result of prejudice or, at least, prejudice conventionally defined. Rather it has to do with patterns of social interactions that are shaped by race – and a phenomenon that economists call spillovers.
Economists have long noted that multiple companies in an industry often congregate in an area – think of movie companies in Hollywood or investment bankers on Wall Street – and observed that these firms become more profitable. Indeed, this may be one reason why an up-and-coming tech company would want to locate in Silicon Valley, rather than in Tennessee, where costs are far cheaper.
