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Discrimination and Skill Differences in an Equilibrium Search Model

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Author Info
Bowlus, Audra J
Eckstein, Zvi

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Abstract

In this paper, we analyse an equilibrium search model with three sources for wage and unemployment differentials among workers with the same (observed) human capital but different appearance (race): unobserved productivity (skill), search intensities and discrimination (Becker 1957) due to an appearance-based employer disutility factor. Because these sources affect the earnings distributions differently, empirical identification of these potential sources for the explanation of wage and unemployment differentials is possible. We show that the structural parameters of the model, including the firm’s disutility from certain workers, are identifiable using standard labour market survey data. We demonstrate identification using data from the National Longitudinal Survey of Youth. Estimation of these parameters by matching moments from a sample of black and white high school graduates implies: a) blacks have a 9% lower productivity level than whites; b) the disutility factor in employer’s preferences is 28% of the white’s productivity level; and c) 53% of firms have a disutility factor in their utility toward blacks.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1859.

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Date of creation: Apr 1998
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Handle: RePEc:cpr:ceprdp:1859

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Related research
Keywords: Discrimination; equilibrium search; race; Unemployment;

Other versions of this item:

Find related papers by JEL classification:
J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities and Races; Non-labor Discrimination
J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J7 - Labor and Demographic Economics - - Labor Discrimination

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-40, December. [Downloadable!] (restricted)
    Other versions:
  2. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-33, April. [Downloadable!] (restricted)
  3. Sattinger, Michael, 1998. "Statistical Discrimination with Employment Criteria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 205-37, February.
    Other versions:
  4. Hellerstein, J-K & Neumark, D, 1995. "Sex, Wages, and Productivity : an Empirical Analysis of Israeli, Firm-Level Data," Papers 9501, Michigan State - Econometrics and Economic Theory.
    Other versions:
  5. Bowlus, Audra J & Kiefer, Nicholas M & Neumann, George R, 1995. "Estimation of Equilibrium Wage Distributions with Heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages S119-31, Suppl. De. [Downloadable!] (restricted)
  6. John J. Donohue III & James Heckman, 1991. "Continuous Versus Episodic Change: The Impact of Civil Rights Policy on the Economic Status of Blacks," NBER Working Papers 3894, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Zvi Eckstein & Kenneth I. Wolpin, 1999. "Estimating The Effect Of Racial Discrimination On First Job Wage Offers," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 384-392, August. [Downloadable!] (restricted)
  8. Bowlus, Audra J, 1997. "A Search Interpretation of Male-Female Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 625-57, October. [Downloadable!] (restricted)
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  9. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 869-95, October. [Downloadable!] (restricted)
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  10. Christian Bontemps & Jean-Marc Robin & Gerard J. van den Berg, 1997. "Equilibrium Search with Productivity Dispersion: Theory and Estimation," Tinbergen Institute Discussion Papers 97-081/3, Tinbergen Institute.
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  11. Dale T. Mortensen, 1988. "Equilibrium Wage Distrihutions: A Synthesis," Discussion Papers 811, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  12. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christian Dustmann & Nikolaos Theodoropoulos, 2006. "Ethnic Minority Immigrants and their Children in Britain," CReAM Discussion Paper Series 0610, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London. [Downloadable!]
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  2. Shouyong Shi, 2006. "Wage Differentials, Discrimination and Efficiency," Working Papers tecipa-189, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
  3. Ambra Poggi, 2008. "Job satisfaction, working conditions and job-expectations," LABORatorio R. Revelli Working Papers Series 74, LABORatorio R. Revelli, Centre for Employment Studies. [Downloadable!]
  4. Luca Flabbi, 2007. "Prejudice and Gender Differentials in the U.S. Labor Market in the Last Twenty Years," Carlo Alberto Notebooks 57, Collegio Carlo Alberto. [Downloadable!]
    Other versions:
  5. Kaas, Leo & Lu, Jun, 2009. "Equal-Treatment Policy in a Random Search Model with Taste Discrimination," IZA Discussion Papers 4173, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Rosén, Åsa, 1998. "Search, Bargaining and Employer Discrimination," Working Paper Series 1998:13, Uppsala University, Department of Economics. [Downloadable!]
  7. Barr & Oduro, Abena, 2000. "Ethnicity and wage determination in Ghana," Policy Research Working Paper Series 2506, The World Bank. [Downloadable!]
  8. Christian Holzner & Andrey Launov, 2005. "Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation," IZA Discussion Papers 1904, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  9. Jesper Bagger and Morten Henningsen, 2008. "Job Durations and the Job Search Model: A Two-Country, Multi-Sample Analysis," Discussion Papers 553, Research Department of Statistics Norway. [Downloadable!]
  10. Boris Hirsch & Thorsten Schank & Claus Schnabel, 2006. "Gender Differences in Labor Supply to Monopsonistic Firms: An Empirical Analysis Using Linked Employer-Employee Data from Germany," IZA Discussion Papers 2443, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Giovanni Sulis, 2007. "Gender Wage Differentials in Italy: a Structural Estimation Approach," Working Paper CRENoS 200715, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
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