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Does Equal Pay Legislation Reduce Labour Market Inequality?

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  • Kaas, Leo

    (Goethe University Frankfurt)

Abstract

This paper considers a labour market model of monopsonistic competition with taste-based discrimination against minority workers to study the effect of equal pay legislation on labour market inequality. When the taste for discrimination is small or competition is weak, the policy removes job segregation and the wage gap completely. However, with a bigger taste for discrimination or stronger competition, equal pay legislation leads to more job segregation, and sometimes minority workers end up earning less than before. Profits of discriminating firms may increase, and discrimination can persist in the long run although it would have disappeared without the policy.

Suggested Citation

  • Kaas, Leo, 2006. "Does Equal Pay Legislation Reduce Labour Market Inequality?," IZA Discussion Papers 2421, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp2421
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    Cited by:

    1. Goerke, Laszlo & Neugart, Michael, 2017. "Social comparisons in oligopsony," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 196-209.
    2. Laszlo Goerke & Michael Neugart, 2017. "Social comparisons in Oligopsony," IAAEG Discussion Papers until 2011 201704, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    3. Kaas, Leo & Lu, Jun, 2010. "Equal-treatment policy in a random search model with taste discrimination," Labour Economics, Elsevier, vol. 17(4), pages 699-709, August.
    4. Akyol, Metin & Neugart, Michael & Pichler, Stefan, 2015. "A tradable employment quota," Labour Economics, Elsevier, vol. 36(C), pages 48-63.
    5. Merlino, Luca Paolo, 2012. "Discrimination, technology and unemployment," Labour Economics, Elsevier, vol. 19(4), pages 557-567.
    6. Lagerlöf, Johan N.M., 2020. "Strategic gains from discrimination," European Economic Review, Elsevier, vol. 122(C).

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    More about this item

    Keywords

    monopsonistic competition; discrimination; equal pay legislation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)

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