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Car Ownership and the Labor Market of Ethnic Minorities

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  • Gautier, Pieter A.

    (Vrije Universiteit Amsterdam)

  • Zenou, Yves

    (Monash University)

Abstract

We show how small initial wealth differences between low skilled black and white workers can generate large differences in their labor-market outcomes. This even occurs in the absence of a taste for discrimination against blacks or exogenous differences in the distance to jobs. Because of the initial wealth difference, blacks cannot afford cars while whites can. Car ownership allows whites to reach more jobs per unit of time and this gives them a better bargaining position. As a result, in equilibrium, blacks end up with both higher unemployment rates and lower wages than whites. Furthermore, it takes more time for blacks to reach their jobs even though they travel less miles. Those predictions are consistent with the data. Better access to capital markets or better public transportation will reduce the differences in labor market outcomes.

Suggested Citation

  • Gautier, Pieter A. & Zenou, Yves, 2008. "Car Ownership and the Labor Market of Ethnic Minorities," IZA Discussion Papers 3814, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3814
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    More about this item

    Keywords

    job search; multiple job centers; spatial labor markets; ethnic minorities; transportation mismatch;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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