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Discrimination, technology and unemployment

  • Merlino, Luca Paolo

I study the interaction between discrimination and investment using a directed search model where firms decide the capital intensity of their production technologies before being matched. Discrimination makes some workers cheap to hire. As a consequence, some firms might save on capital costs adopting labour intensive technologies. This framework allows one to reconcile search models with three well-known facts regarding the labour market outcomes of minority workers: low wages, high unemployment and occupational segregation. Furthermore, the model questions the role of equal pay legislation in reducing inequality since removing this restriction, i.e., allowing firms to post type-contingent wages, eliminates the negative effects of discrimination on investment and wages.

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File URL: http://www.sciencedirect.com/science/article/pii/S0927537112000498
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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 19 (2012)
Issue (Month): 4 ()
Pages: 557-567

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Handle: RePEc:eee:labeco:v:19:y:2012:i:4:p:557-567
DOI: 10.1016/j.labeco.2012.05.006
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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