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Discrimination and Skill Differences in an Equilibrium Search Model

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  • Audra J. Bowlus

    ()
    (University of Western Ontario and Vrije Universiteit Amsterdam)

  • Zvi Eckstein

    (Tel Aviv University & Boston University)

Abstract

In this paper we analyze an equilibrium search model with threesources for wage andunemployment differentials among workers with the same (observed)human capital but different appearance (race): unobservedproductivity (skill), search intensities and discrimination (Becker 1957)due to an appearance-based employer disutility factor. Because theyaffect the earnings distributionsdifferently, empirical identification of these potential sources forthe explanation of wage and unemployment differentials is possible.We show that the structural parameters of the model, including thefirm's disutility from certain workers, are identifiable usingstandard labor market survey data. Wedemonstrate identification using data from the National LongitudinalSurvey of Youth. Estimation of these parameters by matching momentsfrom a sample of black and white high school graduates implies:blacks have a 9% lower productivity level than whites;the disutility factor in employer's preferences is one-third of thewhite's productivity level; and50% of firms have a disutility factor in their utility toward blacks.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 98-112/3.

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Date of creation: 21 Oct 1998
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Handle: RePEc:dgr:uvatin:19980112

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  1. Sattinger, Michael, 1998. "Statistical Discrimination with Employment Criteria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 205-37, February.
  2. Bowlus, Audra J & Kiefer, Nicholas M & Neumann, George R, 1995. "Estimation of Equilibrium Wage Distributions with Heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages S119-31, Suppl. De.
  3. Bowlus, Audra J, 1997. "A Search Interpretation of Male-Female Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 625-57, October.
  4. Berg, G.J. & Ridder, G., 1993. "An empirical equilibrium search model of the labour market," Serie Research Memoranda 0039, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  5. Derek A. Neal & William R. Johnson, 1995. "The Role of Pre-Market Factors in Black-White Wage Differences," NBER Working Papers 5124, National Bureau of Economic Research, Inc.
  6. C, Bontemps & Jean-Marc Robin & G, Van Den Berg, 1997. "Equilibrium Search with Productivity Dispersion : Theory and Estimation," Working Papers 97-09, Centre de Recherche en Economie et Statistique.
  7. Donohue, John J, III & Heckman, James, 1991. "Continuous versus Episodic Change: The Impact of Civil Rights Policy on the Economic Status of Blacks," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1603-43, December.
  8. Hellerstein, J-K & Neumark, D, 1995. "Sex, Wages, and Productivity : an Empirical Analysis of Israeli, Firm-Level Data," Papers 9501, Michigan State - Econometrics and Economic Theory.
  9. 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.
  10. 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.
  11. Dale T. Mortensen, 1988. "Equilibrium Wage Distrihutions: A Synthesis," Discussion Papers 811, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-33, April.
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