Group Conflict, Racial Inequality, and Stratification

Abstract

We present a simple equilibrium model of group conflict that formalizes several key insights of stratification economics. To begin with, discrimination is a purposeful activity pursued by dominant groups in order to maintain their status in society. However, not every member of the dominant group needs to fully engage in discriminatory efforts. In other words, dominant-group members can free ride on discriminatory actions taken by members of the same group. At the same time, though, someone must have discriminated, otherwise discrimination would not exist in equilibrium. We also show that discrimination is wasteful from a societal standpoint; yet, it persists because of the dominant group’s interest in maintaining their status, the fact that marginalized groups’ agency in lessening the effects of discrimination has costs, and the costly and imperfect nature of antidiscrimination enforcement. In particular, when the burden of proving discriminatory behavior falls on individuals in the marginalized group, discrimination will never be completely removed. Finally, we highlight how racial income inequality reverberates into wealth inequality (i.e., stratification), and we discuss the role of reparations in mitigating such outcomes.