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Discrimination in the Equilibrium Search Model with Wage-Tenure Contracts

  • Fang, Zheng
  • Sakellariou, Chris

We extend the Burdett and Coles (2003) search model with wage-tenure contracts to two types of workers and firms and derive the equilibrium earnings distributions for both types of workers, by means of which we succeed in predicting many stylized facts found in empirics. For example, we find that at the same wage level, majority workers almost always experience a faster wage increase than the minority workers; minority workers have a higher unemployment rate; discriminating firms make lower profit than non-discriminating firms and offers to minority workers by non-discriminating firms are consistently superior to those provided by discriminating firms etc. Besides, we find a similar result to the classical discrimination theory that the average wage of the majority workers, though higher in most cases, can be smaller than their counterpart’s wage when the fraction of discriminating firms is small and the degree of recruiting discrimination and disutility are mild. We also show that in a special case of CRRA utility function with the coefficient of relative risk aversion approaching infinity, our model degenerates to Bowlus and Eckstein (2002).

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27515.

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Date of creation: Feb 2010
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Handle: RePEc:pra:mprapa:27515
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  13. Bernt Bratsberg & Dek Terrell, 1998. "Experience, Tenure, and Wage Growth of Young Black and White Men," Journal of Human Resources, University of Wisconsin Press, vol. 33(3), pages 658-682.
  14. Luca Flabbi, 2004. "Gender Discrimination Estimation in a Search Model with Matching and Bargaining," Working Papers gueconwpa~04-04-08, Georgetown University, Department of Economics.
  15. Marianne Bertrand & Sendhil Mullainathan, 2004. "Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination," American Economic Review, American Economic Association, vol. 94(4), pages 991-1013, September.
  16. Kerwin Kofi Charles & Jonathan Guryan, 2011. "Studying Discrimination: Fundamental Challenges and Recent Progress," NBER Working Papers 17156, National Bureau of Economic Research, Inc.
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  18. Heather Antecol & Kelly Bedard, 2001. "The Racial Wage Gap: The Importance of Labor Force Attachment Differences Across Black, Mexican and White Men," Claremont Colleges Working Papers 2001-35, Claremont Colleges.
  19. Blau, Francine D & Kahn, Lawrence M, 1996. "Wage Structure and Gender Earnings Differentials: An International Comparison," Economica, London School of Economics and Political Science, vol. 63(250), pages S29-62, Suppl..
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  24. Albrecht, James & Björklund, Anders & Vroman, Susan, 2001. "Is There a Glass Ceiling in Sweden?," IZA Discussion Papers 282, Institute for the Study of Labor (IZA).
  25. Kerwin Kofi Charles & Jonathan Guryan, 2008. "Prejudice and Wages: An Empirical Assessment of Becker's The Economics of Discrimination," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 773-809, October.
  26. Zheng Fang & Chris Sakellariou, 2011. "A Case of Sticky Floors: Gender Wage Differentials in Thailand," Asian Economic Journal, East Asian Economic Association, vol. 25(1), pages 35-54, 03.
  27. William Rodgers & William Spriggs, 1996. "What does the AFQT really measure: Race, wages, schooling and the AFQT score," The Review of Black Political Economy, Springer, vol. 24(4), pages 13-46, June.
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