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Competition and Discrimination : a not so Obvious Relationship

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  • Clémence Berson

    () (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

Discrimination models have diffivulties to study discrimination without assuming that prejudiced firms are more productive and results lead to workers' segregation. In this article, the model uses oligopsony and heterogeneity of workers' preferences to obtain a persistent discrimination. Firms hire both thpes of workers and pay a lower wage to the workers discriminated against whatever their taste for discrimination. A single prejudiced firm leads to a substancial wage gap in all firms. Consequently, the existence of discrimination allows a non-zero profit for unprejudiced firms and they have also no incentives to push out prejudiced firms. Moreover, the wage gap is affected by firms' spread out as well as by the number of prejudiced firms in the market. Government policies decrease the impact of taste for discrimination on wages but governments are not interested in.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00565309.

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Date of creation: Jan 2011
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Handle: RePEc:hal:cesptp:halshs-00565309

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Keywords: Discrimination; oligopsony; wage gap.;

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