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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. Welch, Finis, 1976. "Employment Quotas for Minorities," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S105-39, August.
  2. Bowlus, A.J. & Eckstein, Z., 1998. "Discrimination and Skill Differences in an Equilibrium Search Model," Papers 04-98, Tel Aviv.
  3. Rosén, Åsa, 1998. "Search, Bargaining and Employer Discrimination," Working Paper Series 1998:13, Uppsala University, Department of Economics.
  4. David Neumark & Wendy A. Stock, 2001. "The Effects of Race and Sex Discrimination Laws," NBER Working Papers 8215, National Bureau of Economic Research, Inc.
  5. Leo Kaas, 2009. "Does Equal Pay Legislation Reduce Labour Market Inequality?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 51-71, 03.
  6. Shouyong Shi, 2006. "Wage Differentials, Discrimination and Efficiency," Working Papers tecipa-189, University of Toronto, Department of Economics.
  7. David Neumark & Roy J. Bank & Kyle D. Van Nort, 1995. "Sex Discrimination in Restaurant Hiring: An Audit Study," NBER Working Papers 5024, National Bureau of Economic Research, Inc.
  8. Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," American Economic Review, American Economic Association, vol. 95(4), pages 1327-1340, September.
  9. 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.
  10. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  11. Richard Startz & Lundberg, . "Private Discrimination and Social Intervention in Competitive Labor Markets," Rodney L. White Center for Financial Research Working Papers 19-81, Wharton School Rodney L. White Center for Financial Research.
  12. David Neumark & Harry Holzer, 2000. "Assessing Affirmative Action," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 483-568, September.
  13. Marianne Bertrand & Sendhil Mullainathan, 2004. "Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination," American Economic Review, American Economic Association, vol. 94(4), pages 991-1013, September.
  14. 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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  16. repec:aea:jeclit:v:43:y:2005:i:4:p:959-988 is not listed on IDEAS
  17. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
  18. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  19. Bisping, Timothy O & Fain, James R, 2000. "Job Queues, Discrimination, and Affirmative Action," Economic Inquiry, Western Economic Association International, vol. 38(1), pages 123-35, January.
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