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Employer discrimination and market structure: Does more concentration mean more discrimination?

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  • Ederington, Josh
  • Sandford, Jeremy

Abstract

We formalize Gary Becker’s dynamic conjecture that competitive forces drive discriminating employers from the market in the long run, using a dynamic model of a monopolistically competitive industry characterized by sunk costs and sequential entry. An advantage of this formalization is that it demonstrates the importance of the structure of production costs, as well as market power, in explaining the long-run survival of discriminatory firms. In addition, we show that, despite decades of empirical research on this connection, there is no consistent theoretical relationship between the degree of market concentration within an industry and the degree of discrimination. However, we do find an indirect link in which market liberalization has a more pronounced effect in reducing discrimination in more concentrated markets.

Suggested Citation

  • Ederington, Josh & Sandford, Jeremy, 2016. "Employer discrimination and market structure: Does more concentration mean more discrimination?," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 1-33.
    • Handle: RePEc:eee:indorg:v:48:y:2016:i:c:p:1-33
    DOI: 10.1016/j.ijindorg.2016.05.008
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    Cited by:

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    2. Borowczyk-Martins, Daniel & Bradley, Jake & Tarasonis, Linas, 2018. "Racial discrimination in the U.S. labor market: Employment and wage differentials by skill," Labour Economics, Elsevier, vol. 50(C), pages 45-66.
    3. Ben Yahmed, Sarra, 2023. "Gender wage discrimination with employer prejudice and trade openness," World Development, Elsevier, vol. 170(C).
    4. Hirata, Guilherme & Soares, Rodrigo R., 2020. "Competition and the racial wage gap: Evidence from Brazil," Journal of Development Economics, Elsevier, vol. 146(C).

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    More about this item

    Keywords

    Market structure; Discriminationse; Market concentration;
    All these keywords.

    JEL classification:

    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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