Does Equal Pay Legislation Reduce Labour Market Inequality?
AbstractThis paper considers a labour market model of monopsonistic competition with taste-based discrimination against minority workers to study the effect of equal pay legislation on labour market inequality. When the taste for discrimination is small or competition is weak, the policy removes job segregation and the wage gap completely. However, with a bigger taste for discrimination or stronger competition, equal pay legislation leads to more job segregation, and sometimes minority workers end up earning less than before. Profits of discriminating firms may increase, and discrimination can persist in the long run although it would have disappeared without the policy.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2421.
Length: 26 pages
Date of creation: Nov 2006
Date of revision:
Publication status: published in: Scandinavian Journal of Economics, 2009, 111(1), 51 - 71
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Other versions of this item:
- Leo Kaas, 2009. "Does Equal Pay Legislation Reduce Labour Market Inequality?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 51-71, 03.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
- J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)
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- Kaas, Leo & Lu, Jun, 2009. "Equal-Treatment Policy in a Random Search Model with Taste Discrimination," IZA Discussion Papers 4173, Institute for the Study of Labor (IZA).
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