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Racial Discrimination in Labor Markets with Posted Wage Offers

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  • Kevin Lang
  • Michael Manove
  • William T. Dickens

Abstract

We analyze race discrimination in labor markets in which wage offers are posted. If employers with job vacancies receive multiple applicants, they choose the most qualified but may choose arbitrarily among equally qualified applicants. In the model, firms post wages, workers choose where to apply, and firms decide which workers to hire. Labor-market frictions greatly amplify racial disparities, so mild discriminatory tastes or small productivity differences can produce large wage differentials between the races. Compared with the nondiscriminatory equilibrium, the discriminatory equilibrium features lower net output, lower wages for both white and black workers and greater profits for firms.
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Suggested Citation

  • Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," American Economic Review, American Economic Association, vol. 95(4), pages 1327-1340, September.
    • Handle: RePEc:aea:aecrev:v:95:y:2005:i:4:p:1327-1340
    Note: DOI: 10.1257/0002828054825547
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    References listed on IDEAS

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    1. Moen, Espen R., 2002. "Do Good Workers Hurt Bad Workers - or is it the Other Way Around?," CEPR Discussion Papers 3471, C.E.P.R. Discussion Papers.
    2. James D. Montgomery, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 163-179.
    3. Espen R. Moen, 2003. "Do good workers hurt bad workers-or is it the other way around?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 779-800, May.
    4. Fudenberg, Drew & Levine, David K, 1993. "Self-Confirming Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 523-545, May.
    5. Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," American Economic Review, American Economic Association, vol. 95(4), pages 1327-1340, September.
    6. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
    7. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
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    JEL classification:

    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General

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