Segregation, Discrimination, and Firm Entry: Evidence from Post-war African-american Movie Theaters

Abstract: Segregation in public accommodation was an important feature of African-American life prior to the civil rights movement and among other things adversely affected minority access to business and culture. In this paper we study so-called Negro movie theaters in the post-war era, documenting the effects of racial discrimination and other forces on theater location. The predicted effects of racial bias on entry by theaters is ambiguous. It reduces entry of black-owned theaters by limiting the access to key inputs, while at the same time driving black customers away from white theaters and toward African-American theaters. We find that the effects of racial bias appear to be nonlinear. For much of the country, a greater degree of racial bias is associated with more African-American theaters, though the region with the strongest negative racial attitudes saw far fewer theaters. While Southern states both score higher on quantitative measures of racial bias and had a greater concentration of theaters, our structural estimates of firm entry suggest that the greater number of African-American theaters in the region is due to lower fixed costs in Southern states. Further evidence comes from the effect of competition from white theaters. In general, the presence of white theaters has little impact on African-American theater entry, however as a county’s education rises, the presence of white theaters crowds out African-American theaters. This suggests that white theaters are a closer substitute in more racially tolerant areas. From these results, we draw implications for the effect of discrimination and segregation on business enterprise and minority consumption of differentiated products.