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Local labor markets and taste-based discrimination

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  • Clémence Berson

    (Banque de France
    CES-University Paris 1)

Abstract

This article appeals to heterogeneity in workers’ non-wage preferences to model taste-based discrimination. Firms hire both types of workers and pay lower wages to minority workers, whatever their taste for discrimination. A single prejudiced firm in the market produces a substantial wage gap in all firms. Consequently, discrimination allows unprejudiced firms to make non-zero profits, so that they have little incentive to drive out prejudiced firms. As the market does not eliminate discrimination, state intervention is required. Indirect policies do not affect the absolute wage gap between the two groups, but may be more likely to be used than direct policies.

Suggested Citation

  • Clémence Berson, 2016. "Local labor markets and taste-based discrimination," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-21, December.
    • Handle: RePEc:spr:izalbr:v:5:y:2016:i:1:d:10.1186_s40172-016-0045-9
    DOI: 10.1186/s40172-016-0045-9
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    4. Pu‐yan Nie & Yong‐cong Yang, 2023. "Innovation and competition with human capital input," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1779-1785, April.
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    More about this item

    Keywords

    Discrimination; Oligopsony; Wage gap;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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