Government-Mandated Discriminatory Policies
AbstractThis paper provides a simple explanation for why some minority groups are economically successful, despite being subject to government-mandated discriminatory policies. We study an economy with private and public sectors in which workers invest in imperfectly observable skills that are important to the private sector but not to the public sector. A law allows native majority workers to be employed in the public sector with positive probability while excluding the minority from it. We show that even when the public sector offers the highest wage rate, it is still possible that the discriminated group is, on average, economically more successful. The reason is that the preferential policy lowers the majority's incentive to invest in imperfectly observable skills by exacerbating the informational free riding problem in the private sector labor market
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 562.
Length: 25 pages
Date of creation: 15 Aug 2001
Date of revision:
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Discrimination; Informational Free Riding; Income Distribution;
Other versions of this item:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
- J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-09-26 (All new papers)
- NEP-CDM-2001-09-26 (Collective Decision-Making)
- NEP-POL-2001-09-26 (Positive Political Economics)
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