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A search model with endogenous job destruction and discrimination: Why equal wage policies may not eliminate wage disparity

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  • Lanning, Jonathan A.

Abstract

This paper extends the search with discrimination framework by introducing jobs that are constrained by equal wage policies, and endogenous job destruction that creates Becker-like competitive pressure on prejudiced firms. The model predicts a number of stylized facts observed in the U.S. labor market, including persistent aggregate wage inequality, prevalent within-firm wage equality, overlapping wage distributions for different worker types, and some, but imperfect, job sorting/segregation. Numeric simulations are offered to illustrate some of the model's predictions. These include a counterintuitive relationship between wage inequality and equal wage policies that can arise in special cases: under specific assumptions equal wage policies can actually increase the steady-state level of market discrimination. I discuss this result's implication that different policies may be optimal to combat discrimination based on race versus discrimination based on gender, though this finding may be of limited practical importance.

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  • Lanning, Jonathan A., 2014. "A search model with endogenous job destruction and discrimination: Why equal wage policies may not eliminate wage disparity," Labour Economics, Elsevier, vol. 26(C), pages 55-71.
    • Handle: RePEc:eee:labeco:v:26:y:2014:i:c:p:55-71
    DOI: 10.1016/j.labeco.2013.11.001
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    Cited by:

    1. Diego Gentile Passaro & Fuhito Kojima & Bobak Pakzad-Hurson, 2023. "Equal Pay for Similar Work," Papers 2306.17111, arXiv.org.
    2. Wei-Bin ZHANG, 2014. "Gender Discrimination, Education and Economic Growth in a Generalized Uzawa-Lucas Two-Sector Model," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 7(1), pages 1-34.
    3. Jonathan Lain, 2019. "Discrimination in a search and matching model with self-employment," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-35, December.
    4. Natalya Yemelina & Saule Kemelbayeva & Sergey Roshchin, 2024. "Dynamics of Gender Wage Gap in Kazakhstan for 2011-2019," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 67(1), pages 47-71, March.

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    More about this item

    Keywords

    Labor discrimination; Antidiscrimination policy; Search; Wage differentials;
    All these keywords.

    JEL classification:

    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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