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Discrimination and Skill Differences in an Equilibrium Search Model

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Abstract

In this paper we analyze 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 they 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 labor 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 one-third of the white's productivity level; and c) 50% of firms have a disutility factor in their utility toward blacks.

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  • Audra J. Bowlus & Zvi Eckstein, 1998. "Discrimination and Skill Differences in an Equilibrium Search Model," University of Western Ontario, Departmental Research Report Series 9804, University of Western Ontario, Department of Economics.
    • Handle: RePEc:uwo:uwowop:9804
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    More about this item

    JEL classification:

    • 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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J7 - Labor and Demographic Economics - - Labor Discrimination

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