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Search Discrimination, Human Capital Accumulation, and Intergenerational Mobility

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Arcidiacono, Peter

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Abstract

Unequal outcomes for blacks and whites include earnings inequality, which increases with age, and differences in unemployment rates. I develop a matching model with search discrimination and human capital accumulation. Multiple equilibria exist, one with low unemployment rates and steep earnings profiles and one with high unemployment rates and flat earnings profiles. Hence, two groups of workers that differ on an observable, exogenous characteristic (say, race) can be in two different equilibria. In the high unemployment equilibrium, less vacancies are posted leading to the concept of search discrimination. A quota system can remove the discriminatory outcomes. However, if parents' investment decisions affect the investment decisions of their children, policies which remove the search discrimination through a quota system still lead to unequal results in the short run. In this case, whites may want to subsidize black investment as black investment improves the labor market outcomes for whites.

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Paper provided by Duke University, Department of Economics in its series Working Papers with number 00-18.

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Date of creation: 2000
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Handle: RePEc:duk:dukeec:00-18

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Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
J70 - Labor and Demographic Economics - - Labor Discrimination - - - General

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  1. Andrea Moro & Peter Norman, . "Affirmative Action in a Competitive Economy," Penn CARESS Working Papers ca48ba70927f48a4e11034658, Penn Economics Department. [Downloadable!]
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  2. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September. [Downloadable!] (restricted)
  3. 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.
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  4. 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. [Downloadable!] (restricted)
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  5. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November. [Downloadable!] (restricted)
  6. Kenneth Arrow, 1971. "The Theory of Discrimination," Working Papers 403, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  7. George J. Mailath & Larry Samuelson & Avner Shaked, . ""Endogenous Inequality in Integrated Labor Markets with Two-sided Search''," CARESS Working Papres 98-06, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences. [Downloadable!]
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