Wage differentials, discrimination and efficiency
In this paper I construct a search model of a large labor market in which workers are heterogeneous in productivity and (homogeneous) firms post wages and a ranking of workers to direct workers' search. I establish the following results. First, the wage differential is negatively related to productivity when the productivity differential is small, while a positive relationship emerges when the productivity differential is large. Second, as the productivity differential decreases to zero, the reverse wage differential increases and so it remains strictly positive in the limit. Third, high-productivity workers are not discriminated against even when they have a lower wage, because they always have a higher priority in employment and higher expected wage than low-productivity workers. Fourth, the equilibrium is socially efficient, and so the wage differential and the ranking are part of the efficient mechanism. Finally, I provide numerical examples to illustrate the wage distribution.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
- Joseph G. Altonji & Rebecca M. Blank, .
"Race and Gender in the Labor Market,"
IPR working papers
98-18, Institute for Policy Resarch at Northwestern University.
- Moen, Espen R, 1997.
"Competitive Search Equilibrium,"
Journal of Political Economy,
University of Chicago Press, vol. 105(2), pages 385-411, April.
- Bowlus, Audra J & Eckstein, Zvi, 1998.
"Discrimination and Skill Differences in an Equilibrium Search Model,"
CEPR Discussion Papers
1859, C.E.P.R. Discussion Papers.
- 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.
- Bowlus, A.J. & Eckstein, Z., 1998. "Discrimination and Skill Differences in an Equilibrium Search Model," Papers 04-98, Tel Aviv.
- Audra J. Bowlus & Zvi Eckstein, 1998. "Discrimination and Skill Differences in an Equilibrium Search Model," Tinbergen Institute Discussion Papers 98-112/3, Tinbergen Institute.
- Audra J. Bowlus & Zvi Eckstein, 1998. "Discrimination and Skill Differences in an Equilibrium Search Model," UWO Department of Economics Working Papers 9802, University of Western Ontario, Department of Economics.
- Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
- Benoit Julien & John Kennes & Ian King, 2000.
"Bidding for Labor,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 619-649, October.
- Acemoglu, Daron & Shimer, Robert, 1999.
"Holdups and Efficiency with Search Frictions,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
- Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
- 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.
- Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-145, Boston University - Department of Economics.
- Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
- Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
- Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-33, April.
- Shi, Shouyong, 2001. "Frictional Assignment. I. Efficiency," Journal of Economic Theory, Elsevier, vol. 98(2), pages 232-260, June.
When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:50:y:2006:i:4:p:849-875. 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: (Zhang, Lei)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.