November 2013

The Visible Hand: Race and Online Market Outcomes

Volume 123, Issue 572, pp. F469–F492
Luke C. D. Stein

We examine the effect of race on market outcomes by selling iPods through local online classified advertisements throughout the United States. Each ad features a photograph including a dark- or light-skinned hand, or one with a wrist tattoo. Black sellers receive fewer and lower offers than white sellers, and the correspondence with black sellers indicates lower levels of trust. Black sellers’ outcomes are particularly poor in thin markets (suggesting that discrimination may not ‘survive’ competition among buyers) and those with themost racial isolation and property crime (consistent with channels through which statistical discriminationmight operate)

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