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Racial Discrimination in the Labor Market: Theory and Empirics

  • Kevin Lang
  • Jee-Yeon K. Lehmann

We review theories of race discrimination in the labor market. Taste-based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread, but no existing model explains the unemployment rate differential. Models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment. At their current state of development, models of statistical discrimination based on rational stereotypes have little empirical content. It is plausible that models combining elements of the search models with statistical discrimination could fit the data. We suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17450.

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Date of creation: Sep 2011
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Publication status: published as Kevin Lang & Jee-Yeon K. Lehmann, 2012. "Racial Discrimination in the Labor Market: Theory and Empirics," Journal of Economic Literature, American Economic Association, vol. 50(4), pages 959-1006, December.
Handle: RePEc:nbr:nberwo:17450
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