From Elizabeth Ananat, Shihe Fu, and Stephen Ross:
We document that wages of nonwhites, and particularly of blacks, appear to rise less with agglomeration of employment and concentrations of human capital than do white wages. For blacks, this pattern holds even though our method allows for non-parametric controls for the effects of age, education, and other demographics on wages and for the return to agglomeration and human capital concentrations to vary across the same demographic variables and across metropolitan areas. We find that an individual’s return to agglomeration in wages rises with the share of workers in a work location who have the same race as this individual. This finding is consistent with non-whites receiving lower returns to agglomeration and human capital concentrations because they have fewer same-race peers and fewer highly-educated same-race peers at work from whom to enjoy spillovers. As further support for this hypothesis, we estimate models of total factor productivity using data on manufacturing establishments for the same sample of metropolitan areas. We find evidence that the relationship between firm productivity and agglomeration increases in magnitude when the race composition of the firm’s employees matches the race composition of other workers in the same location.