IDEAS home Printed from https://ideas.repec.org/a/aea/jeclit/v50y2012i4p959-1006.html
   My bibliography  Save this article

Racial Discrimination in the Labor Market: Theory and Empirics

Author

Listed:
  • Kevin Lang
  • Jee-Yeon K. Lehmann

Abstract

We review theories of race discrimination in the labor market. Taste-based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread, but no existing model explains the unemployment rate differential. Models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment. At their current state of development, models of statistical discrimination based on rational stereotypes have little empirical content. It is plausible that models combining elements of the search models with statistical discrimination could fit the data. We suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy. (JEL J15, J31, J64, J71)

Suggested Citation

  • Kevin Lang & Jee-Yeon K. Lehmann, 2012. "Racial Discrimination in the Labor Market: Theory and Empirics," Journal of Economic Literature, American Economic Association, vol. 50(4), pages 959-1006, December.
  • Handle: RePEc:aea:jeclit:v:50:y:2012:i:4:p:959-1006
    Note: DOI: 10.1257/jel.50.4.959
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.50.4.959
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Samuel Bowles & Glenn C. Loury & Rajiv Sethi, 2014. "Group Inequality," Journal of the European Economic Association, European Economic Association, vol. 12(1), pages 129-152, February.
    2. Kevin Lang, 2007. "Introduction to Poverty and Discrimination," Introductory Chapters, in: Poverty and Discrimination, Princeton University Press.
    3. 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.
    4. Card, David & Rothstein, Jesse, 2007. "Racial segregation and the black-white test score gap," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2158-2184, December.
    5. Laura Giuliano & David I. Levine & Jonathan Leonard, 2009. "Manager Race and the Race of New Hires," Journal of Labor Economics, University of Chicago Press, vol. 27(4), pages 589-631, October.
    6. Flinn, Christopher J & Heckman, James J, 1983. "Are Unemployment and Out of the Labor Force Behaviorally Distinct Labor Force States?," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 28-42, January.
    7. Galenianos, Manolis & Kircher, Philipp, 2009. "Directed search with multiple job applications," Journal of Economic Theory, Elsevier, vol. 144(2), pages 445-471, March.
    8. Shouyong Shi, 2009. "Directed Search for Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 77(2), pages 561-584, March.
    9. van den Berg, Gerard J & van Ours, Jan C, 1996. "Unemployment Dynamics and Duration Dependence," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 100-125, January.
    10. Joseph G. Altonji & Prashant Bharadwaj & Fabian Lange, 2012. "Changes in the Characteristics of American Youth: Implications for Adult Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 30(4), pages 783-828.
    11. Kevin Lang, 1986. "A Language Theory of Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 363-382.
    12. James J. Heckman, 1998. "Detecting Discrimination," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 101-116, Spring.
    13. John A. List, 2004. "The Nature and Extent of Discrimination in the Marketplace: Evidence from the Field," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 49-89.
    14. Rosen, Asa, 1997. "An equilibrium search-matching model of discrimination," European Economic Review, Elsevier, vol. 41(8), pages 1589-1613, August.
    15. Kerwin Kofi Charles & Jonathan Guryan, 2011. "Studying Discrimination: Fundamental Challenges and Recent Progress," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 479-511, September.
    16. Patrick Bayer & Stephen L. Ross & Giorgio Topa, 2008. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1150-1196, December.
    17. Fryer Jr., Roland G. & Torelli, Paul, 2010. "An empirical analysis of 'acting white'," Journal of Public Economics, Elsevier, vol. 94(5-6), pages 380-396, June.
    18. Carneiro, Pedro & Heckman, James J & Masterov, Dimitriy V, 2005. "Labor Market Discrimination and Racial Differences in Premarket Factors," Journal of Law and Economics, University of Chicago Press, vol. 48(1), pages 1-39, April.
    19. Henry S. Farber & Robert Gibbons, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1007-1047.
    20. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, Febrero.
    21. David Bjerk, 2007. "The Differing Nature of Black-White Wage Inequality Across Occupational Sectors," Journal of Human Resources, University of Wisconsin Press, vol. 42(2).
    22. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
    23. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
    24. Collins, William J. & Margo, Robert A., 2000. "Residential segregation and socioeconomic outcomes: When did ghettos go bad?," Economics Letters, Elsevier, vol. 69(2), pages 239-243, November.
    25. Kenneth J. Arrow, 1998. "What Has Economics to Say about Racial Discrimination?," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 91-100, Spring.
    26. Bentley W. MacLeod, 2003. "Optimal Contracting with Subjective Evaluation," American Economic Review, American Economic Association, vol. 93(1), pages 216-240, March.
    27. Derek Neal, 2004. "The Measured Black-White Wage Gap among Women Is Too Small," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 1-28, February.
    28. Kerwin Kofi Charles & Jonathan Guryan, 2008. "Prejudice and Wages: An Empirical Assessment of Becker's The Economics of Discrimination," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 773-809, October.
    29. Kerwin Kofi Charles & Patrick Kline, 2006. "Relational Costs and the Production of Social Capital: Evidence from Carpooling," Economic Journal, Royal Economic Society, vol. 116(511), pages 581-604, April.
    30. Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 76-104, October.
    31. David Bjerk, 2008. "Glass Ceilings or Sticky Floors? Statistical Discrimination in a Dynamic Model of Hiring and Promotion," Economic Journal, Royal Economic Society, vol. 118(530), pages 961-982, July.
    32. Stefano DellaVigna & M. Daniele Paserman, 2005. "Job Search and Impatience," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 527-588, July.
    33. Daniel Immergluck, 1996. "What employers want: Job prospects for less-educated workers," The Review of Black Political Economy, Springer;National Economic Association, vol. 24(4), pages 135-143, June.
    34. Kim, Young Chul & Loury, Glenn, 2009. "Group Reputation and the Dynamics of Statistical Discrimination," MPRA Paper 18765, University Library of Munich, Germany.
    35. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, vol. 73(3), pages 340-347, June.
    36. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    37. David Neumark & Harry Holzer, 2000. "Assessing Affirmative Action," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 483-568, September.
    38. Dan Black & Natalia Kolesnikova & Seth Sanders & Lowell Taylor, 2013. "The role of location in evaluating racial wage disparity," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-18, December.
    39. David M. Cutler & Edward L. Glaeser, 1997. "Are Ghettos Good or Bad?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 827-872.
    40. Sasaki, Masaru, 1999. "An Equilibrium Search Model with Coworker Discrimination," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 377-407, April.
    41. Kerwin Kofi Charles & Jonathan Guryan, 2007. "Prejudice and The Economics of Discrimination," NBER Working Papers 13661, National Bureau of Economic Research, Inc.
    42. Peters, Michael, 2005. "Unobservable Heterogeneity in Directed Search," Microeconomics.ca working papers peters-05-06-13-01-50-30, Vancouver School of Economics, revised 16 Oct 2009.
    43. Rooth, Dan-Olof, 2007. "Implicit Discrimination in Hiring: Real World Evidence," IZA Discussion Papers 2764, Institute of Labor Economics (IZA).
    44. Dan Black & Amelia Haviland & Seth Sanders & Lowell Taylor, 2006. "Why Do Minority Men Earn Less? A Study of Wage Differentials among the Highly Educated," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 300-313, May.
    45. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 869-895, October.
    46. David Austen-Smith & Roland G. Fryer, 2005. "An Economic Analysis of "Acting White"," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 551-583.
    47. David Austen-Smith & Ronald G. Fryer, 2005. "An Economic Analysis of 'Acting White'," Discussion Papers 1399, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    48. Levin Jonathan, 2009. "The Dynamics of Collective Reputation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, August.
    49. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-333, April.
    50. repec:fth:prinin:310 is not listed on IDEAS
    51. Amitabh Chandra, 2000. "Labor-Market Dropouts and the Racial Wage Gap: 1940-1990," American Economic Review, American Economic Association, vol. 90(2), pages 333-338, May.
    52. Lehmann, Jee-Yeon, 2011. "Job assignment and promotion under statistical discrimination: evidence from the early careers of lawyers," MPRA Paper 33466, University Library of Munich, Germany.
    53. Bruce A. Weinberg & Patricia B. Reagan & Jeffrey J. Yankow, 2004. "Do Neighborhoods Affect Hours Worked? Evidence from Longitudinal Data," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 891-924, October.
    54. Akerlof, George A, 1985. "Discriminatory, Status-based Wages among Tradition-oriented, Stochastically Trading Coconut Producers," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 265-276, April.
    55. William A. Darity & Patrick L. Mason, 1998. "Evidence on Discrimination in Employment: Codes of Color, Codes of Gender," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 63-90, Spring.
    56. Fryer, Roland, 2007. "Belief Flipping in a Dynamic Model of Statistical Discrimination," Scholarly Articles 2955768, Harvard University Department of Economics.
    57. Glenn C. Loury, 1998. "Discrimination in the Post-Civil Rights Era: Beyond Market Interactions," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 117-126, Spring.
    58. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
    59. Roland G. Fryer & Jacob K. Goeree & Charles A. Holt, 2005. "Experience-Based Discrimination: Classroom Games," The Journal of Economic Education, Taylor & Francis Journals, vol. 36(2), pages 160-170, April.
    60. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roland G. Fryer, Jr. & Devah Pager & Jörg L. Spenkuch, 2013. "Racial Disparities in Job Finding and Offered Wages," Journal of Law and Economics, University of Chicago Press, vol. 56(3), pages 633-689.
    2. Bond, Timothy N. & Lehmann, Jee-Yeon K., 2018. "Prejudice and racial matches in employment," Labour Economics, Elsevier, vol. 51(C), pages 271-293.
    3. William J. Collins & Michael Q. Moody, 2017. "Racial Differences in American Women's Labor Market Outcomes: A Long-Run View," NBER Working Papers 23397, National Bureau of Economic Research, Inc.
    4. Lepage, Louis Pierre, 2020. "Endogenous learning and the persistence of employer biases in the labor market," CLEF Working Paper Series 24, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    5. John J. Donohue III, 2005. "The Law and Economics of Antidiscrimination Law," NBER Working Papers 11631, National Bureau of Economic Research, Inc.
    6. Paul Frijters, 2003. "Testing for Employee Discrimination using Matched Employer-Employee Data: Theory and Evidence," Paul Frijters Discussion Papers 2003-1, School of Economics and Finance, Queensland University of Technology.
    7. Paul Frijters & Michael A. Shields & Stephen Wheatley Price & Nikolaos Theodoropoulos, 2006. "Testing for Employee Discrimination in Britain using Matched Employer-Employee Data," University of Cyprus Working Papers in Economics 8-2006, University of Cyprus Department of Economics.
    8. Chowdhury, Shyamal & Ooi, Evarn & Slonim, Robert, 2020. "Racial Discrimination and White First Name Adoption: Evidence from a Correspondence Study in the Australian Labour Market," IZA Discussion Papers 13208, Institute of Labor Economics (IZA).
    9. Borowczyk-Martins, Daniel & Bradley, Jake & Tarasonis, Linas, 2018. "Racial discrimination in the U.S. labor market: Employment and wage differentials by skill," Labour Economics, Elsevier, vol. 50(C), pages 45-66.
    10. David Neumark, 2018. "Experimental Research on Labor Market Discrimination," Journal of Economic Literature, American Economic Association, vol. 56(3), pages 799-866, September.
    11. Lepage, Louis Pierre, 2021. "Endogenous learning, persistent employer biases, and discrimination," CLEF Working Paper Series 34, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    12. repec:eee:labchp:v:3:y:1999:i:pc:p:3143-3259 is not listed on IDEAS
    13. Richard Chisik, 2015. "Job market signalling, stereotype threat and counter-stereotypical behaviour," Canadian Journal of Economics, Canadian Economics Association, vol. 48(1), pages 155-188, February.
    14. Kevin Lang & Michael Manove, 2011. "Education and Labor Market Discrimination," American Economic Review, American Economic Association, vol. 101(4), pages 1467-1496, June.
    15. John S. Heywood & Daniel Parent, 2012. "Performance Pay and the White-Black Wage Gap," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 249-290.
    16. Rohini Somanathan, 2016. "Group Inequality in Democracies: Lessons from Cross-National Experiences," Working Papers id:11335, eSocialSciences.
    17. David Masclet & Emmanuel Peterle & Sophie Larribeau, 2012. "The Role of Information in Deterring Discrimination: A New Experimental Evidence of Statistical Discrimination," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201238, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    18. Ross Levine & Alexey Levkov & Yona Rubinstein, 2008. "Racial Discrimination and Competition," NBER Working Papers 14273, National Bureau of Economic Research, Inc.
    19. Bünstorf, Guido & Krabel, Stefan, 2014. "Gender and Immigration: Double Negative Effects in the Labor Market Outcomes of University Graduates in Germany?," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100290, Verein für Socialpolitik / German Economic Association.
    20. Barr & Oduro, Abena, 2000. "Ethnicity and wage determination in Ghana," Policy Research Working Paper Series 2506, The World Bank.
    21. Mongoljin Batsaikhan & Mette Gørtz & John Kennes & Ran Sun Lyng & Daniel Monte & Norovsambuu Tumennasan, 2019. "Daycare Choice and Ethnic Diversity: Evidence from a Randomized Survey," Economics Working Papers 2019-02, Department of Economics and Business Economics, Aarhus University.

    More about this item

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:jeclit:v:50:y:2012:i:4:p:959-1006. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.