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Estimating The Effect Of Racial Discrimination On First Job Wage Offers

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  • Zvi Eckstein
  • Kenneth I. Wolpin

Abstract

In this paper we develop and implement a method for bounding the extent to which labor market discrimination can account for racial wage differentials. The method is based on a two-sided, search-matching model that formally accounts for unobserved heterogeneity and unobserved offered wages. We find that racial differences in offered wages are proportionately twice (three times) as large as racial differences in accepted wages for high-school dropouts (high-school graduates). The results indicate that discrimination could account for the entire racial wage-offer differential for high-school dropouts and for high-school graduates, i.e., the bound on the extent of discrimination is not informative. © 1999 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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  • Zvi Eckstein & Kenneth I. Wolpin, 1999. "Estimating The Effect Of Racial Discrimination On First Job Wage Offers," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 384-392, August.
    • Handle: RePEc:tpr:restat:v:81:y:1999:i:3:p:384-392
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    Cited by:

    1. 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.
    2. Rendon, Silvio, 2007. "Does Wealth Explain BlackWhite Differences in Early Employment Careers?," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 484-500, October.
    3. Luca Flabbi, 2010. "Gender Discrimination Estimation In A Search Model With Matching And Bargaining," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(3), pages 745-783, August.
    4. Bünstorf, Guido & Krabel, Stefan, 2014. "Gender and Immigration: Double Negative Effects in the Labor Market Outcomes of University Graduates in Germany?," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100290, Verein für Socialpolitik / German Economic Association.
    5. Gianmarco I.P. Ottaviano & Giovanni Peri, 2021. "The economic value of cultural diversity: evidence from US cities," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 7, pages 187-222, World Scientific Publishing Co. Pte. Ltd..
    6. Bruno Decreuse & Linas Tarasonis, 2016. "Statistical Discrimination in a Search Equilibrium Model: Racial Wage and Employment Disparities in the US," Working Papers halshs-01327961, HAL.
    7. Flabbi, Luca & Moro, Andrea, 2012. "The effect of job flexibility on female labor market outcomes: Estimates from a search and bargaining model," Journal of Econometrics, Elsevier, vol. 168(1), pages 81-95.
    8. Terry Sicular, 1998. "Capital Flight and Foreign Investment: Two Tales From China and Russia," The World Economy, Wiley Blackwell, vol. 21(5), pages 589-602, July.
    9. Roland G. Fryer, Jr. & Devah Pager & Jörg L. Spenkuch, 2013. "Racial Disparities in Job Finding and Offered Wages," Journal of Law and Economics, University of Chicago Press, vol. 56(3), pages 633-689.
    10. Bruno Decreuse & Linas Tarasonis, 2021. "Statistical Discrimination in a Search Equilibrium Model: Racial Wage and Employment Disparities in the US," Annals of Economics and Statistics, GENES, issue 143, pages 105-136.
    11. Jonas Maibom, 2023. "The Welfare Effects Of Mandatory Reemployment Programs: Combining A Structural Model And Experimental Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 607-640, May.
    12. Christopher Rauh & Aranu Valladares-Esteban, 2023. "On the black-white gaps in labor supply and earnings over the lifecycle in the US," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 424-449, December.
    13. James Fain, 2017. "Can Minorities Escape Wage Discrimination by Forming Firms?," Computational Economics, Springer;Society for Computational Economics, vol. 50(3), pages 425-445, October.
    14. Limor Golan & Carl Sanders & Jonathan James, 2019. "What Explains the Racial Gaps in Task Assignment and Pay Over the Life-Cycle?," 2019 Meeting Papers 320, Society for Economic Dynamics.
    15. Ahn, Tom & Arcidiacono, Peter & Murphy, Alvin & Swinton, Omari, 2010. "Explaining cross-racial differences in teenage labor force participation: Results from a two-sided matching model," Journal of Econometrics, Elsevier, vol. 156(1), pages 201-211, May.
    16. Bustelo, Monserrat & Flabbi, Luca & Piras, Claudia & Tejada, Mauricio, 2019. "Female Labor Force Participation, Labor Market Dynamic and Growth in LAC," IDB Publications (Working Papers) 9420, Inter-American Development Bank.
    17. Francesco Renna & Randall King, 2007. "The Impact of Racial Discrimination on the Early Career Outcomes of Young Men," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 35(3), pages 269-278, September.
    18. Maibom, Jonas, 2021. "The Welfare Effects of Mandatory Reemployment Programs: Combining a Structural Model and Experimental Data," IZA Discussion Papers 14866, Institute of Labor Economics (IZA).
    19. Tamar Kricheli Katz & Tali Regev & Shay Lavie & Haggai Porat & Ronen Avraham, 2020. "Those who tan and those who don’t: A natural experiment on colorism," PLOS ONE, Public Library of Science, vol. 15(7), pages 1-14, July.
    20. Jonathan Lain, 2019. "Discrimination in a search and matching model with self-employment," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-35, December.

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