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Equal-treatment policy in a random search model with taste discrimination

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  • Kaas, Leo
  • Lu, Jun
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Abstract

We consider a search model of the labor market with two types of equally productive workers and two types of firms, discriminators and non-discriminators. Without policy intervention, there is wage dispersion between and within the two worker groups, but all wage differences become negligible when the taste for discrimination is small. We analyze the effect of an equal-pay policy, both in combination with affirmative action and without. When equal opportunity of hiring cannot be enforced, wage dispersion increases and wages for minority workers fall substantially relative to laissez faire. Sometimes also the wage gap between worker groups widens in response to the policy.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 4 (August)
Pages: 699-709

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Handle: RePEc:eee:labeco:v:17:y:2010:i:4:p:699-709

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Web page: http://www.elsevier.com/locate/labeco

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Keywords: Search model Wage dispersion Discrimination Equal-pay policy;

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  1. Marianne Bertrand & Sendhil Mullainathan, 2003. "Are Emily and Greg More Employable than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination," NBER Working Papers 9873, National Bureau of Economic Research, Inc.
  2. Kaas, Leo, 2006. "Does Equal Pay Legislation Reduce Labour Market Inequality?," IZA Discussion Papers 2421, Institute for the Study of Labor (IZA).
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  4. Audra J. Bowlus & Zvi Eckstein, 1998. "Discrimination and Skill Differences in an Equilibrium Search Model," UWO Department of Economics Working Papers 9802, University of Western Ontario, Department of Economics.
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  9. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-40, December.
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  13. Shouyong Shi, 2006. "Wage Differentials, Discrimination and Efficiency," Working Papers tecipa-189, University of Toronto, Department of Economics.
  14. P. A. Riach & J. Rich, 2002. "Field Experiments of Discrimination in the Market Place," Economic Journal, Royal Economic Society, vol. 112(483), pages 480-518, November.
  15. David Neumark & Harry Holzer, 2000. "Assessing Affirmative Action," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 483-568, September.
  16. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
  17. David Neumark & Wendy A. Stock, 2001. "The Effects of Race and Sex Discrimination Laws," NBER Working Papers 8215, National Bureau of Economic Research, Inc.
  18. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
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