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Competition and Discrimination: a not so Obvious Relationship

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Abstract

Discrimination models have diffivulties to study discrimination without assuming that prejudiced firms are more productive and results lead to workers' segregation. In this article, the model uses oligopsony and heterogeneity of workers' preferences to obtain a persistent discrimination. Firms hire both thpes of workers and pay a lower wage to the workers discriminated against whatever their taste for discrimination. A single prejudiced firm leads to a substancial wage gap in all firms. Consequently, the existence of discrimination allows a non-zero profit for unprejudiced firms and they have also no incentives to push out prejudiced firms. Moreover, the wage gap is affected by firms' spread out as well as by the number of prejudiced firms in the market. Government policies decrease the impact of taste for discrimination on wages but governments are not interested in

Suggested Citation

  • Clémence Berson, 2011. "Competition and Discrimination: a not so Obvious Relationship," Documents de travail du Centre d'Economie de la Sorbonne 11005, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:11005
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    Keywords

    Discrimination; oligopsony; wage gap;

    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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