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The Effect Of Statistical Discrimination On Black-White Wage Inequality: Estimating A Model With Multiple Equilibria

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  • Andrea Moro

Abstract

This article presents the structural estimation of the parameters of a statistical discrimination model. Although the model is capable of displaying multiple equilibria, an estimation strategy that identifies both the model parameters and the equilibrium selected by the economic agents is developed and empirically implemented. A comparison between the selected equilibria and the other potential equilibria reveals that the decline in wage inequality experienced in the U.S. economy cannot be attributed to changes in the equilibrium selection. Nonetheless, a counterfactual experiment shows that in a color-blind society blacks' wage would have been on average more than 20% higher. Copyright 2003 By The Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Andrea Moro, 2003. "The Effect Of Statistical Discrimination On Black-White Wage Inequality: Estimating A Model With Multiple Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 467-500, May.
    • Handle: RePEc:ier:iecrev:v:44:y:2003:i:2:p:467-500
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