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Endogenous Inequality in Integrated Labor Markets with Two-Sided Search

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Author Info
George J. Mailath
Larry Samuelson
Avner Shaked

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Abstract

We consider a market with "red" and "green" workers, where labels are payoff irrelevant. Workers may acquire skills. Skilled workers search for vacancies, while firms search for workers. A unique symmetric equilibrium exists in which color is irrelevant. There are also asymmetric equilibria in which firms search only for green workers, more green than red workers acquire skills, skilled green workers receive higher wages, and the unemployment rate is higher among skilled red workers. Discrimination between ex ante identical individuals arises in equilibrium, and yet firms have perfect information about their workers, and strictly prefer to hire minority workers.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 90 (2000)
Issue (Month): 1 (March)
Pages: 46-72
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Handle: RePEc:aea:aecrev:v:90:y:2000:i:1:p:46-72

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  1. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 542-71, June. [Downloadable!] (restricted)
  2. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October. [Downloadable!] (restricted)
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  3. Broersma, Lourens & Van Ours, Jan C., 1999. "Job searchers, job matches and the elasticity of matching," Labour Economics, Elsevier, vol. 6(1), pages 77-93, March. [Downloadable!] (restricted)
  4. repec:fth:prinin:353 is not listed on IDEAS
  5. Coles, Melvyn G & Smith, Eric, 1996. "Cross-Section Estimation of the Matching Function: Evidence from England and Wales," Economica, London School of Economics and Political Science, vol. 63(252), pages 589-97, November. [Downloadable!] (restricted)
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  6. Smith, E. & Burdett, K., 1995. "The Low Skill Trap," UBC Departmental Archives 95-40, UBC Department of Economics.
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  7. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989-1), pages 1-76. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lundberg, Shelly & Startz, Richard, 2004. "Information and Racial Exclusion," IZA Discussion Papers 1389, Institute for the Study of Labor (IZA). [Downloadable!]
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  2. Kiminori Matsuyama, 2002. "Explaining Diversity: Symmetry-Breaking in Complementarity Games," American Economic Review, American Economic Association, vol. 92(2), pages 241-246, May. [Downloadable!] (restricted)
    Other versions:
  3. Peter Arcidiacono, 2000. "Search Discrimination, Human Capital Accumulation and Intergenerational Mobility," Econometric Society World Congress 2000 Contributed Papers 0142, Econometric Society. [Downloadable!]
  4. Verdier, Thierry & Zenou, Yves, 2003. "Racial Beliefs, Location and the Causes of Crime," Working Paper Series 602, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  5. Azrieli, Yaron, 2007. "Categorization and correlation in a random-matching game," MPRA Paper 5475, University Library of Munich, Germany. [Downloadable!]
  6. Bjerk, David & Han, Seungjin, 2005. "Assortative Marriage and the Effects of Government Homecare Provision Programs on Gender Wage and Participation Inequality," Micro Theory Working Papers bjerk-05-11-21-10-55-45, Microeconomics.ca Website, revised 06 Sep 2006. [Downloadable!]
  7. SEABRIGHT, Paul, 2004. "Continuous Preferences Can Cause Discontinuous Choices : an Application to the Impact of Incentives on Altruism," IDEI Working Papers 257, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  8. Adrian Masters, 2004. "Firm level hiring policy with culturally biased testing," Discussion Papers 04-14, University at Albany, SUNY, Department of Economics. [Downloadable!]
  9. Luca Flabbi, 2005. "Gender Discrimination Estimation in a Search Model with Matching and Bargaining," IZA Discussion Papers 1764, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. Nicola Persico, 2002. "Racial Profiling, Fairness, and Effectiveness of Policing," American Economic Review, American Economic Association, vol. 92(5), pages 1472-1497, December. [Downloadable!] (restricted)
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