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Racial Discrimination in Labor Markets with Posted Wage Offers

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  • Kevin Lang

    () (Institute for Economic Development, Boston University)

  • Michael Manove

    () (Institute for Economic Development, Boston University)

  • William T. Dickens

    () (The Brookings Institution)

Abstract

We analyze race discrimination in labor markets in which wage offers are posted. If employers with job vacancies receive multiple applicants, they choose the most qualified but may choose arbitrarily among equally qualified applicants. In the model, firms post wages, workers choose where to apply, and firms decide which workers to hire. Labor-market frictions greatly amplify racial disparities, so mild discriminatory tastes or small productivity differences can produce large wage differentials between the races. Compared with the nondiscriminatory equilibrium, the discriminatory equilibrium features lower net output, lower wages for both white and black workers and greater profits for firms.

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Bibliographic Info

Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - The Institute for Economic Development Working Papers Series with number dp-145.

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Length: 30 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:bos:iedwpr:dp-145

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References

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  1. Moen, Espen R, 2002. "Do Good Workers Hurt Bad Workers - or is it the Other Way Around?," CEPR Discussion Papers 3471, C.E.P.R. Discussion Papers.
  2. Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-145, Boston University - Department of Economics.
  3. Fudenberg, D. & Levine, D.K., 1991. "Self-Confirming Equilibrium ," Working papers 581, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Shouyong Shi, 2006. "Wage Differentials, Discrimination and Efficiency," Working Papers tecipa-189, University of Toronto, Department of Economics.
  5. Robert Shimer, 2001. "The Assignment of Workers to Jobs In an Economy with Coordination Frictions," NBER Working Papers 8501, National Bureau of Economic Research, Inc.
  6. Montgomery, James D, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 163-79, February.
  7. Lang, Kevin, 1991. "Persistent Wage Dispersion and Involuntary Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 181-202, February.
  8. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
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Cited by:
  1. Moen, Espen R, 2002. "Do Good Workers Hurt Bad Workers - or is it the Other Way Around?," CEPR Discussion Papers 3471, C.E.P.R. Discussion Papers.
  2. Pierre-Philippe Combes & Bruno Decreuse & Morgane Laouenan & Alain Trannoy, 2011. "Customer Discrimination and Employment Outcomes: Theory and Evidence from the French Labor Market," Working Papers halshs-00624435, HAL.
  3. Kaas, Leo & Lu, Jun, 2010. "Equal-treatment policy in a random search model with taste discrimination," Labour Economics, Elsevier, vol. 17(4), pages 699-709, August.
  4. Joel Shapiro, 2003. "Wage Inequality in a Frictional Labor Market," Working Papers 94, Barcelona Graduate School of Economics.
  5. 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.
  6. Andrea Weber & Christine Zulehner, 2009. "Competition and Gender Prejudice: Are Discriminatory Employers Doomed to Fail?," NRN working papers 2009-26, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  7. Paul A. Grout & In-Uck Park & Silvia Sonderegger, 2009. "An Economic Theory of Glass Ceiling," The Centre for Market and Public Organisation 09/227, Department of Economics, University of Bristol, UK.
  8. Steinar Holden & Asa Rosen, 2009. "Discrimination and Employment Protection," CESifo Working Paper Series 2822, CESifo Group Munich.
  9. Nicolas L. Jacquet & Serene Tan, 2007. "On the Segmentation of Markets," Working Papers 18-2007, Singapore Management University, School of Economics.
  10. Julie L. Hotchkiss & Myriam Quispe-Agnoli, 2009. "Employer monopsony power in the labor market for undocumented workers," Working Paper 2009-14, Federal Reserve Bank of Atlanta.
  11. Bjerk, David & Han, Seungjin, 2005. "Assortative Marriage and the Effects of Government Homecare Provision Programs on Gender Wage and Participation Inequality," Micro Theory Working Papers bjerk-05-11-21-10-55-45, Microeconomics.ca Website, revised 06 Sep 2006.
  12. Shi, Shouyong, 2006. "Wage differentials, discrimination and efficiency," European Economic Review, Elsevier, vol. 50(4), pages 849-875, May.
  13. Nicodemo, Catia & Nicolini, Rosella, 2012. "Random or Referral Hiring: When Social Connections Matter," IZA Discussion Papers 6312, Institute for the Study of Labor (IZA).

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