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Social Interaction in the Labor Market: Essays on Earnings Inequality, Labor Substitutability, and Segregation


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  • Kahanec, M.

    (Tilburg University)


Why are most minority groups relatively poor? Why are they poorer in regions where they constitute a relatively large share of the population? Why desegregation of minority people goes hand in hand with increasing inter-ethnic earnings differential? And what are the mutual effects of the presence of various ethnic groups in the labor market on their earnings? The purpose of this thesis is to answer this kind of questions about social and economic interaction of people of different ethnicity, thereby furthering our understanding of the complexities of ethnic and racial relations. In order to accomplish this task, I look into the roles of (i) local spillover effects in human capital acquisition and (ii) social distance between people of different ethnicities in social interaction. It is established that the interaction of such social distances and spillover effects in social interaction of different ethnic groups has important consequences for their labor market outcomes. Perhaps the most important findings of this thesis are that (i) social interaction of different ethnic groups promotes their specialization, (ii) although integration facilitates human capital acquisition, it exposes minority individuals to more intense competition that lowers their relative wage per efficiency unit of labor, (iii) minority and majority labor is complementary in production and thus, in terms of efficiency, majority people benefit from presence of minority co-workers and there are benefits to multiethnic labor force in production, and (iv) the improvement in information and communication technologies promotes desegregation but increases interethnic earnings inequality.

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-178544.

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Length: 161
Date of creation: 2006
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Publication status: Published
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-178544

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  1. Moro, Andrea & Norman, Peter, 2004. "A general equilibrium model of statistical discrimination," Journal of Economic Theory, Elsevier, Elsevier, vol. 114(1), pages 1-30, January.
  2. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
  3. Kahanec, M., 2004. "Social Interaction and the Minority-Majority Earnings Inequality: Why Being a Minority Hurts but being a big Minority Hurts More," Discussion Paper, Tilburg University, Center for Economic Research 2004-41, Tilburg University, Center for Economic Research.
  4. Lundberg, S. & Startz, R., 1992. "On the Persistence of Racial Inequality," Working Papers, University of Washington, Department of Economics 92-04, University of Washington, Department of Economics.
  5. Chiswick, Barry R. & Miller, Paul W., 2002. "Do Enclaves Matter in Immigrant Adjustment?," IZA Discussion Papers 449, Institute for the Study of Labor (IZA).
  6. Shelly Lundberg & Richard Startz, 1998. "Race, Information, and Segregation," Working Papers, University of Washington, Department of Economics 0047, University of Washington, Department of Economics.
  7. Hicks, John, 1970. "Elasticity of Substitution Again: Substitutes and Complements," Oxford Economic Papers, Oxford University Press, vol. 22(3), pages 289-96, November.
  8. Munshi, Kaivan, 2004. "Social learning in a heterogeneous population: technology diffusion in the Indian Green Revolution," Journal of Development Economics, Elsevier, Elsevier, vol. 73(1), pages 185-213, February.
  9. William A. Darity Jr., 1982. "The Human Capital Approach to Black-White Earnings Inequality: Some Unsettled Questions," Journal of Human Resources, University of Wisconsin Press, vol. 17(1), pages 72-93.
  10. John J. Donohue III & James Heckman, 1991. "Continuous Versus Episodic Change: The Impact of Civil Rights Policy on the Economic Status of Blacks," NBER Working Papers 3894, National Bureau of Economic Research, Inc.
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