Oren Reshef, Washington University in St. Louis; Abhay Aneja, University of California, Berkeley, and Michael Luca, Johns Hopkins University

Labeling businesses as Black-owned can significantly boost their sales, we found in a recent study.

In June 2020, the business-review website Yelp introduced a feature allowing consumers to search for Black-owned restaurants. As professors who study digitization, inequality and the economics of technology, we were interested in understanding its effect. So we analyzed more than two years of data from Yelp.

We found that restaurants labeled as Black-owned saw a 65% increase in online traffic, more searches and calls, and higher sales through food orders and in-person visits. These results suggest that for many Black-owned businesses, a simple change in their visibility can create new opportunities for growth.

However, the impact varied by location. The gains were strongest in politically liberal areas and places with lower levels of implicit racial bias, as measured by regional variation in implicit-association test scores. This suggests that platforms are in part channeling, as opposed to creating, customer demand. Interestingly, white customers drove most of the increase, suggesting the label helped raise awareness of businesses they might not have considered before.

This wasn’t just a 2020 trend – in follow-up analyses, we found similar results among businesses that opted into the feature later. We also collaborated with the online furniture company Wayfair, which launched a “Black Maker” label on its site in 2023, and found that it led to a 57% increase in web traffic. Finally, Yelp rolled out a Latino-owned label on the platform late that year, which led to a similar increase in consumer engagement.

Why it matters

This research has implications for business owners, digital platforms and policymakers. Growing awareness of racial inequality – partially driven by the Black Lives Matter movement, especially after the murder of George Floyd in 2020 — has led to increased corporate and customer interest in supporting minority-owned businesses. It also led many companies to make commitments to promote racial equity.

However, more recently, many companies have dismantled these efforts. For instance, Target recently announced that it was eliminating its program to spotlight Black-owned businesses. Our findings suggest that increasing the visibility of minority ownership – a relatively low-cost change – can substantially improve economic outcomes for Black-owned businesses.

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Our results also show that diversity initiatives aren’t just about warm and fuzzy feelings. Businesses should measure and evaluate their impact to ensure their programs are effective. A well-designed program can benefit the bottom line, while a poorly designed one risks being ineffective or even counterproductive.

So it’s important to acknowledge the potential risks. Past research, including some of our own, indicates that revealing racial identity sometimes can lead to discrimination or backlash. While our findings suggest that labeling can have positive effects, a poorly implemented policy can backfire. Yelp’s initiative design empowered users looking to support Black-owned businesses while allowing other users to continue searching in alternative ways.

That means policy design is crucial. What matters isn’t just what information is revealed, but also how it’s communicated. Our analysis shows that customer demand and preferences vary considerably across locations and demographics, meaning that context also matters.

What still isn’t known

While our research suggests that businesses experienced economic benefits from adopting the label, it’s crucial to understand which policy designs work best in the long run. For instance, Yelp’s program used an opt-in feature, which may have contributed to its success.

However, open questions remain. How are platforms affected by labeling businesses? What other types of labels might be impactful, and for which types of businesses? Could some interventions backfire?

Another key question is, which customers respond to racial identity disclosures? Recent advances in data analytics can help companies refine their strategies, making it easier to target the right consumer groups for more effective initiatives.

Ultimately, our study is a step toward understanding how transparency and visibility can shape economic outcomes. It highlights a diversity initiative that has benefited both customers and businesses, and provides a road map for companies that want to design initiatives that matter. And, more broadly, it speaks to a question facing all companies: How can companies better understand and shape their societal footprint?

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The Research Brief is a short take about interesting academic work.

Oren Reshef, Assistant Professor of Strategy and Entrepreneurship, Washington University in St. Louis; Abhay Aneja, Assistant Professor of Law, University of California, Berkeley, and Michael Luca, Director, Technology and Society Initiative, Carey Business School, Johns Hopkins University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Harry Anthony Patrinos, University of Arkansas

In a surprising turnaround, Mississippi, once ranked near the bottom of U.S. education standings, has dramatically improved its student literacy rates.

As of 2023, the state ranks among the top 20 for fourth grade reading, a significant leap from its 49th-place ranking in 2013. This transformation was driven by evidence-based policy reforms focused on early literacy and teacher development.

The rest of the country might want to take note.

That’s because Mississippi’s success offers a proven solution to the reading literacy crisis facing many states – a clear road map for closing early literacy gaps and improving reading outcomes nationwide.

As an expert on the economics of education, I believe the learning crisis is not just an educational issue. It’s also economic.

When students struggle, their academic performance declines. And that leads to lower test scores. Research shows that these declining scores are closely linked to reduced economic growth, as a less educated workforce hampers productivity and innovation.

The Mississippi approach

In 2013, Mississippi implemented a multifaceted strategy for enhancing kindergarten to third grade literacy. The Literacy-Based Promotion Act focuses on early literacy and teacher development. It includes teacher training in proven reading instruction methods and teacher coaching.

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Relying on federally supported research from the Institute of Education Science, the state invested in phonics, fluency, vocabulary and reading comprehension. The law provided K-3 teachers with training and support to help students master reading by the end of third grade.

It includes provisions for reading coaches, parent communication, individual reading plans and other supportive measures. It also includes targeted support for struggling readers. Students repeat the third grade if they fail to meet reading standards.

The state also aligned its test to the NAEP, or National Assessment of Educational Progress, something which not all states do. Often referred to as “The Nation’s Report Card,” the NAEP is a nationwide assessment that measures student performance in various subjects.

Mississippi’s reforms have led to significant gains in reading and math, with fourth graders improving on national assessments.

I believe this is extremely important. That’s because early reading is a foundational skill that helps develop the ability to read at grade level by the end of third grade. It also leads to general academic success, graduating from high school prepared for college, and becoming productive adults less likely to fall into poverty.

Research by Noah Spencer, an economics doctoral student at the University of Toronto, shows that the Mississippi law boosted scores.

Students exposed to it from kindergarten to the third grade gained a 0.25 standard deviation improvement in reading scores. That is roughly equivalent to one year of academic progress in reading, according to educational benchmarks. This gain reflects significant strides in students’ literacy development over the course of a school year.

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Another study has found an even greater impact attributed to grade retention in the third grade – it led to a huge increase in learning in English Language Arts by the sixth grade.

But the Mississippi law is not just about retention. Spencer found that grade retention explains only about 22% of the treatment effect. The rest is presumably due to the other components of the measure – namely, teacher training and coaching.

Other previous research supports these results across the country.

Adopting an early literacy policy improves elementary students’ reading achievement on important student assessments, with third grade retention and instructional support substantially enhancing English learners’ skills. The policy also increases test scores for students’ younger siblings, although it is not clear why.

Moreover, third grade retention programs immediately boost English Language Arts and math achievements into middle school without disciplinary incidents or negatively impacting student attendance.

These changes were achieved despite Mississippi being one of the lowest spenders per pupil in the U.S., proving that strategic investments in teacher development and early literacy can yield impressive results even with limited resources.

The global learning crisis

Mississippi’s success is timely. Millions of children globally struggle to read by age 10. It’s a crisis that has worsened after the COVID-19 pandemic.

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Mississippi’s early literacy interventions show lasting impact and offer a potential solution for other regions facing similar challenges.

In 2024, only 31% of U.S. fourth grade students were proficient or above in reading, according to the NAEP, while 40% were below basic. Reading scores for fourth and eighth graders also dropped by five points compared with 2019, with averages lower than any year since 2005.

Mississippi’s literacy program provides a learning gain equal to a year of schooling. The program costs US$15 million annually – 0.2% of the state budget in 2023 – and $32 per student.

The learning gain associated with the Mississippi program is equal to about an extra quarter of a year. Since each year of schooling raises earnings by about 9%, then a quarter-year gain means that Mississippi students benefiting from the program will increase future earnings by 2.25% a year.

Based on typical high school graduate earnings, the average student can expect to earn an extra $1,000 per year for the rest of their life.

That is, for every dollar Mississippi spends, the state gains about $32 in additional lifetime earnings, offering substantial long-term economic benefits compared with the initial cost.

The Mississippi literacy project focuses on teaching at the right level, which focuses on assessing children’s actual learning levels and then tailoring instruction to meet them, rather than strictly following age- or grade-level curriculum.

Teaching at the right level and a scripted lessons plan are among the most effective strategies to address the global learning crisis. After the World Bank reviewed over 150 education programs in 2020, nearly half showed no learning benefit.

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I believe Mississippi’s progress, despite being the second-poorest state, can serve as a wake-up call.

Harry Anthony Patrinos, Professor of Education Policy, University of Arkansas

This article is republished from The Conversation under a Creative Commons license. Read the original article.