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Does Equal Pay Legislation Reduce Labour Market Inequality?

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  • Leo Kaas

Abstract

This paper considers a labour market model of monopsonistic competition with taste-based discrimination against minority workers to study the effect of equal pay legislation on labour market inequality. When the taste for discrimination is small or competition is weak, the policy removes job segregation and the wage gap completely. However, with a bigger taste for discrimination or stronger competition, equal pay legislation leads to more job segregation, and sometimes minority workers end up earning less than before. Profits of discriminating firms might increase, and discrimination can persist in the long run, although it would have disappeared without the policy. Copyright © The editors of the "Scandinavian Journal of Economics" 2009 .

Suggested Citation

  • Leo Kaas, 2009. "Does Equal Pay Legislation Reduce Labour Market Inequality?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 51-71, March.
  • Handle: RePEc:bla:scandj:v:111:y:2009:i:1:p:51-71
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    References listed on IDEAS

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    Cited by:

    1. Goerke, Laszlo & Neugart, Michael, 2017. "Social comparisons in oligopsony," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 196-209.
    2. Laszlo Goerke & Michael Neugart, 2017. "Social comparisons in Oligopsony," IAAEG Discussion Papers until 2011 201704, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    3. Akyol, Metin & Neugart, Michael & Pichler, Stefan, 2015. "A tradable employment quota," Labour Economics, Elsevier, vol. 36(C), pages 48-63.
    4. Merlino, Luca Paolo, 2012. "Discrimination, technology and unemployment," Labour Economics, Elsevier, vol. 19(4), pages 557-567.
    5. Kaas, Leo & Lu, Jun, 2010. "Equal-treatment policy in a random search model with taste discrimination," Labour Economics, Elsevier, vol. 17(4), pages 699-709, August.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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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