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Equal-Treatment Policy in a Random Search Model with Taste Discrimination

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Author Info
Kaas, Leo () (University of Konstanz)
Lu, Jun () (University of Konstanz)

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Abstract

We consider a search model of the labor market with two types of equally productive workers and two types of firms, discriminators and non-discriminators. Without policy intervention, there is wage dispersion between and within the two worker groups, but all wage differences become negligible when the taste for discrimination is small. We analyze the effect of an equal-pay policy, both in combination with affirmative action and without. When equal opportunity of hiring cannot be enforced, wage dispersion increases and wages for minority workers fall substantially relative to laissez faire. Sometimes also the wage gap between worker groups widens in response to the policy.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4173.

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Length: 35 pages
Date of creation: May 2009
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Handle: RePEc:iza:izadps:dp4173

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Related research
Keywords: search model; wage dispersion; discrimination; equal pay policy;

Other versions of this item:

Find related papers by JEL classification:
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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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References listed on IDEAS
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  1. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-33, April. [Downloadable!] (restricted)
  2. Richard Rogerson & Robert Shimer & Randall Wright, 2005. "Search-Theoretic Models of the Labor Market: A Survey," Journal of Economic Literature, American Economic Association, vol. 43(4), pages 959-988, December. [Downloadable!] (restricted)
    Other versions:
  3. 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)
  4. Harry Holzer & David Neumark, 2000. "Assessing Affirmative Action," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 483-568, September. [Downloadable!] (restricted)
    Other versions:
  5. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July. [Downloadable!] (restricted)
  6. Neumark, David, 1996. "Sex Discrimination in Restaurant Hiring: An Audit Study," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 915-41, August. [Downloadable!] (restricted)
    Other versions:
  7. P. A. Riach & J. Rich, 2002. "Field Experiments of Discrimination in the Market Place," Economic Journal, Royal Economic Society, vol. 112(483), pages 480-518, November. [Downloadable!] (restricted)
  8. David Neumark & Wendy A. Stock, 2001. "The Effects of Race and Sex Discrimination Laws," NBER Working Papers 8215, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Asa Rosen, 2003. "Search, Bargaining, and Employer Discrimination," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 807-830, October. [Downloadable!]
  10. Shi, Shouyong, 2006. "Wage differentials, discrimination and efficiency," European Economic Review, Elsevier, vol. 50(4), pages 849-875, May. [Downloadable!] (restricted)
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  11. Leo Kaas, 2009. "Does Equal Pay Legislation Reduce Labour Market Inequality?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 111(1), pages 51-71, 03. [Downloadable!] (restricted)
    Other versions:
  12. Audra J. Bowlus & Zvi Eckstein, 2002. "Discrimination and Skill Differences in an Equilibrium Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1309-1345, November. [Downloadable!] (restricted)
    Other versions:
  13. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
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This page was last updated on 2009-11-23.

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