Working Paper No. 07-03

What Role Does Racial Integration Play in Economic Performance of the (United) States? An Empirical Investigation Using Panel Data Analysis

Said Boakye

October 2007 (update April 2008)

ABSTRACT

It has been found empirically that social fractionalization limits economic growth and development. What has not been studied is the extent to which social integrative processes may ease these limitations and thus positively contribute to economic growth and development. Using a panel of the 48 contiguous U.S. states as a case study, this paper examines the role racial integration as measured by the percentage of interracial marriages plays in the determination of income per capita. I find that racial integration as measured by the percentage of interracial marriages is a significant predictor of income per capita across these states. To account for the problem of reverse causality and thus endogeneity, the number of decades the states have allowed interracial marriages by repealing antimiscegenation laws is used as instrument for interracial marriages for instrumental variable estimation. I also use the 1967 U.S. Supreme Court’s decision, which overturned the antimiscegenation laws of the states that continued to have such laws as an exogenous event for dfference-in-difference estimation.

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