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Occupational segregation in a Roy model with composition preferences

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  • Chen, Haoning
  • Dong, Miaomiao
  • Henry, Marc
  • Sidorov, Ivan

Abstract

We propose a model of labor market sector self-selection that combines comparative advantage, as in the Roy model, and sector composition preference. Two groups choose between two sectors based on heterogeneous potential incomes and group compositions in each sector. Potential incomes incorporate group specific human capital accumulation and wage discrimination. Composition preferences are interpreted as reflecting group specific amenity preferences as well as homophily and aversion to minority status. We show that occupational segregation is amplified by the composition preferences and we highlight a resulting tension between redistribution and diversity. The model also exhibits tipping from extreme compositions to more balanced ones. Tipping occurs when a small nudge, associated with affirmative action, pushes the system to a very different equilibrium, and when the set of equilibria changes abruptly when a parameter governing the relative importance of pecuniary and composition preferences crosses a threshold.

Suggested Citation

  • Chen, Haoning & Dong, Miaomiao & Henry, Marc & Sidorov, Ivan, 2025. "Occupational segregation in a Roy model with composition preferences," Games and Economic Behavior, Elsevier, vol. 150(C), pages 365-386.
    • Handle: RePEc:eee:gamebe:v:150:y:2025:i:c:p:365-386
    DOI: 10.1016/j.geb.2025.01.010
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    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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