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

Author

Listed:
  • Kaas, Leo

    (Goethe University Frankfurt)

  • Lu, Jun

    (University of Konstanz)

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.

Suggested Citation

  • Kaas, Leo & Lu, Jun, 2009. "Equal-Treatment Policy in a Random Search Model with Taste Discrimination," IZA Discussion Papers 4173, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4173
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    References listed on IDEAS

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    Cited by:

    1. Akyol, Metin & Neugart, Michael & Pichler, Stefan, 2015. "A tradable employment quota," Labour Economics, Elsevier, vol. 36(C), pages 48-63.

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    More about this item

    Keywords

    discrimination; wage dispersion; search model; equal pay policy;
    All these keywords.

    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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