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Racial Discrimination in Labor Markets with Posted Wage Offers

  • Kevin Lang

    ()

    (Institute for Economic Development, Boston University)

  • Michael Manove

    ()

    (Institute for Economic Development, Boston University)

  • William T. Dickens

    ()

    (The Brookings Institution)

We analyze race discrimination in labor markets in which wage offers are posted. If employers with job vacancies receive multiple applicants, they choose the most qualified but may choose arbitrarily among equally qualified applicants. In the model, firms post wages, workers choose where to apply, and firms decide which workers to hire. Labor-market frictions greatly amplify racial disparities, so mild discriminatory tastes or small productivity differences can produce large wage differentials between the races. Compared with the nondiscriminatory equilibrium, the discriminatory equilibrium features lower net output, lower wages for both white and black workers and greater profits for firms.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - The Institute for Economic Development Working Papers Series with number dp-145.

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Length: 30 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:bos:iedwpr:dp-145
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  1. Shouyong Shi, 2006. "Wage Differentials, Discrimination and Efficiency," Working Papers tecipa-189, University of Toronto, Department of Economics.
  2. Drew Fudenberg & David K. Levine, 1993. "Self-Confirming Equilibrium," Levine's Working Paper Archive 2147, David K. Levine.
  3. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  4. Lang, Kevin, 1991. "Persistent Wage Dispersion and Involuntary Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 181-202, February.
  5. 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.
  6. Moen, Espen R, 2002. "Do Good Workers Hurt Bad Workers - or is it the Other Way Around?," CEPR Discussion Papers 3471, C.E.P.R. Discussion Papers.
  7. Robert Shimer, 2001. "The Assignment of Workers to Jobs In an Economy with Coordination Frictions," NBER Working Papers 8501, National Bureau of Economic Research, Inc.
  8. Montgomery, James D, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 163-79, February.
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