Racial prejudice and racial residential segregation in an urban model

Abstract

In this paper, racial prejudice is introduced into an urban model and results about racial discrimination and residential segregation are derived. To be specific, a household maximization problem is used to determine the market rent-distance function that gives no household an incentive to move. Prejudice is introduced by assuming that the racial composition of a location affects a household's utility and by deriving, for both blacks and whites, rent-distance functions that reflect racial composition. These rent-distance functions imply that if whites prefer segregation and some blacks prefer integration, no stable locational equilibrium exists for both races without discrimination.