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Labor Market Discrimination, Pay Inequality, and Effort Variability: An Alternative to the Neoclassical Model


  • Morris Altman

    (University of Saskatchewan)


In model presented in this paper, once one allows for effort variability that is positively related to labor compensation, relatively low wages that are a product of labor market discrimination can persist over time even in a world of perfect product market competition. Low wage labor is no longer cheap labor and market forces cannot eliminate pay inequality due to labor market discrimination. This stands in sharp contrast to standard economic theory which suggests that labor market discrimination cannot explain the persistence of pay differentials between identifiable groups of individuals since such pay inequality would be eliminated by competitive market forces.

Suggested Citation

  • Morris Altman, 1995. "Labor Market Discrimination, Pay Inequality, and Effort Variability: An Alternative to the Neoclassical Model," Eastern Economic Journal, Eastern Economic Association, vol. 21(2), pages 157-169, Spring.
  • Handle: RePEc:eej:eeconj:v:21:y:1995:i:2:p:157-169

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    Cited by:

    1. repec:ilo:ilowps:363153 is not listed on IDEAS
    2. PeĢrotin, V. & Robinson, A. & Loundes, J., 2003. "Equal opportunities practices and enterprise performance," ILO Working Papers 993631533402676, International Labour Organization.

    More about this item


    Discrimination; Inequality; Low Wage; Pay; Wage;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination


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