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Statistical Discrimination in a Search Equilibrium Model: Racial Wage and Employment Disparities in the US

Author

Listed:
  • Linas Tarasonis

    (Bank of Lithuania & Vilnius University)

  • Bruno Decreuse

    (Aix-Marseille University & CNRS & AMSE)

Abstract

In the US, black workers spend more time in unemployment, lose their jobs more rapidly, and earn lower wages than white workers. This paper quantifies the contributions of statistical discrimination, as portrayed by negative stereotyping and screening discrimination, to such employment and wage disparities. We develop an equilibrium search model of statistical discrimination with learning based on Moscarini (2005) and estimate it by indirect inference. We show that statistical discrimination alone cannot simultaneously explain the observed differences in residual wages and monthly job loss probabilities between black and white workers. However, a model with negative stereotyping, larger unemployment valuation and faster learning about the quality of matches for black workers can account for these facts. One implication of our findings is that black workers have larger returns to tenure.

Suggested Citation

  • Linas Tarasonis & Bruno Decreuse, 2020. "Statistical Discrimination in a Search Equilibrium Model: Racial Wage and Employment Disparities in the US," Bank of Lithuania Working Paper Series 82, Bank of Lithuania.
  • Handle: RePEc:lie:wpaper:82
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    References listed on IDEAS

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    3. Luca Flabbi, 2010. "Gender Discrimination Estimation In A Search Model With Matching And Bargaining," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(3), pages 745-783, August.
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    Cited by:

    1. Borowczyk-Martins, Daniel & Bradley, Jake & Tarasonis, Linas, 2018. "Racial discrimination in the U.S. labor market: Employment and wage differentials by skill," Labour Economics, Elsevier, vol. 50(C), pages 45-66.
    2. Jeremy McCauley, 2020. "The Role of Information in Explaining the Lack of Welfare-Induced Migration," Bristol Economics Discussion Papers 20/729, School of Economics, University of Bristol, UK.
    3. Christopher Rauh & Aranu Valladares-Esteban, 2023. "On the black-white gaps in labor supply and earnings over the lifecycle in the US," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 424-449, December.

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    More about this item

    Keywords

    Learning; Screening discrimination; Job search; Indirect inference;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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