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Labor Market Discrimination and the Macroeconomy

Author

Listed:
  • Muhammad Asali

    () (International School of Economics at Tbilisi State University; IZA, Columbia University)

  • Rusudan Gurashvili

    () (National Bank of Georgia)

Abstract

Using Integrated Household Survey data from Georgia, we measure the observable and discriminatory ethnic wage gap, among male and female workers, and the gender wage gap, among Georgians and non-Georgians. The gender wage discrimination is larger than the ethnic wage discrimination. In the second estimation stage, these wage discrimination estimates are used in a general-to-specific vector autoregression framework to test for the Granger causality between discrimination and growth. A general, negative, bidirectional Granger causality is found between these two variables: in the long-run, discrimination reduces economic growth, and economic growth lowers discrimination. Also, we find that higher unemployment rates are associated with increased ethnic wage discrimination—in line with the predictions of Becker’s theory of discrimination.

Suggested Citation

  • Muhammad Asali & Rusudan Gurashvili, 2019. "Labor Market Discrimination and the Macroeconomy," Working Papers 002-19 JEL Codes: J71, O4, International School of Economics at TSU, Tbilisi, Republic of Georgia.
  • Handle: RePEc:tbs:wpaper:19-002
    as

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    References listed on IDEAS

    as
    1. Sedgley, Norman & Elmslie, Bruce, 2006. "Discrimination and growth: The distribution across skills matters," Economics Letters, Elsevier, vol. 90(2), pages 194-199, February.
    2. repec:eee:jcecon:v:46:y:2018:i:4:p:1294-1309 is not listed on IDEAS
    3. Asali, Muhammad & Pignatti, Norberto & Skhirtladze, Sophiko, 2017. "Employment Discrimination in a Former Soviet Union Republic: Evidence from a Field Experiment," IZA Discussion Papers 11056, Institute of Labor Economics (IZA).
    4. Oriana Bandiera & Ashwini Natraj, 2013. "Does Gender Inequality Hinder Development and Economic Growth? Evidence and Policy Implications," World Bank Research Observer, World Bank Group, vol. 28(1), pages 2-21, February.
    5. Kaivan Munshi & Mark Rosenzweig, 2016. "Networks and Misallocation: Insurance, Migration, and the Rural-Urban Wage Gap," American Economic Review, American Economic Association, vol. 106(1), pages 46-98, January.
    6. Seguino, Stephanie, 2000. "Gender Inequality and Economic Growth: A Cross-Country Analysis," World Development, Elsevier, vol. 28(7), pages 1211-1230, July.
    7. Gaëlle Ferrant & Alexandre Kolev, 2016. "Does gender discrimination in social institutions matter for long-term growth?: Cross-country evidence," OECD Development Centre Working Papers 330, OECD Publishing.
    8. Muhammad Asali, 2010. "Jewish-Arab Wage Gap: What Are The Causes?," Defence and Peace Economics, Taylor & Francis Journals, vol. 21(4), pages 367-380.
    9. Adams, Scott J., 2004. "Age discrimination legislation and the employment of older workers," Labour Economics, Elsevier, vol. 11(2), pages 219-241, April.
    10. repec:wly:japmet:v:32:y:2017:i:6:p:1197-1205 is not listed on IDEAS
    11. Stephan Klasen & Francesca Lamanna, 2009. "The Impact of Gender Inequality in Education and Employment on Economic Growth: New Evidence for a Panel of Countries," Feminist Economics, Taylor & Francis Journals, vol. 15(3), pages 91-132.
    12. Garcia-Minguez, Patricio & Sanchez-Losada, Fernando, 2003. "Statistical discrimination and growth: should we subsidize discriminated against workers?," Economics Letters, Elsevier, vol. 79(2), pages 255-261, May.
    13. Schober, Thomas & Winter-Ebmer, Rudolf, 2011. "Gender Wage Inequality and Economic Growth: Is There Really a Puzzle?--A Comment," World Development, Elsevier, vol. 39(8), pages 1476-1484, August.
    14. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
    15. Muhammad Asali & Aamer S. Abu‐Qarn & Michael Beenstock, 2017. "The cycle of violence in the Second Intifada: Causality in nonlinear vector autoregressive models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(6), pages 1197-1205, September.
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    More about this item

    Keywords

    Labor market discrimination; Transition economies; Growth; Granger causality.;

    JEL classification:

    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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