international trade and labor market discrimination textabstractwe embed a competitive search model with labor market discrimination or nepotism into a two sector two country framework in order to analyze how labor market discrimination impacts the pattern of international trade and also how trade trade affects discrimination discrimination or nepotism reduces the matching probability and output in the skilled labor intensive differentiated product sector so that the country with more discriminatory firms has a comparative advantage in the simple sector as countries alter their production mix in accordance with their comparative advantage trade liberalization can then reinforce the negative effect of discrimination on development in the more discriminatory country and reduce its effect in the country with fewer discriminatory firms similarly the profit difference between non discriminatory and discriminatory firms increases in the less discriminatory country and shrinks in the more discriminatory one in this way trade can further reduce discrimination in a country where it is less prevalent and increase it where it is more firmly entrenched

race discrimination an economic perspective we review the empirical literature in economics on discrimination in the labor market and criminal justice system focusing primarily on discrimination by race we then discuss theoretical models of taste based discrimination particularly models of frictional labor markets and models of statistical discrimination including recent work on invalid statistical discrimination we explore and evaluate the evidence for and against these theories although there is substantial evidence of the existence of discrimination little is known about the extent to which disparities are driven by discrimination finally we argue that economists miss the important self enforcing relationship between disparities and discrimination and the effect of disparities in one domain on discrimination in other domains

racial discrimination in the labor market theory and empirics we review theories of race discrimination in the labor market taste based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread but no existing model explains the unemployment rate differential models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment at their current state of development models of statistical discrimination based on rational stereotypes have little empirical content it is plausible that models combining elements of the search models with statistical discrimination could fit the data we suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy jel j15 j31 j64 j71

employment opportunities earnings and the journey to work of minority workers in great britain the cost to minority workers of employer discrimination is generally measured in a competitive framework which focuses upon differences in on the job benefits usually wage rates between racial groups after training and experience are allowed for with other potential costs of employer discrimination given at best more subsidiary attention chiswick i 98 i dex i 984 mcnabb and psacharopoulos i982 mccormick i986 and stewart i983 have recently provided analyses of asian and west indian workers in the united kingdom this paper explores the consequences of employer discrimination if firms cannot discriminate by offering different wages for the same job but may set higher job rejection rates perhaps costlessly because markets do not clear our primary focus is upon comparative journey to work patterns and expenditures for asian and west indian workers in the united kingdom and whether these workers accept jobs at locations that would be unacceptable to whites in order to avoid either a longer spell of unemployment or an inferior occupation with commensurate lower earnings thus within a given residential area minority workers may experience greater commuting expenditures ceteris paribus which are overlooked when comparing earnings or occupational status unlike previous models of search and discrimination in labour markets the focus is placed upon employee response to discrimination rather than the search behaviour of discriminating employers see lippman and mccall i 976 the possibility that the costs of reaching suitable work sites should be incorporated into our understanding of the problems faced by minority workers has been investigated in the united states although in a different context by kain i 964 i 968 i 980 and various other authors including recently ellwood i983 kain considers that the cost of housing market discrimination is understated by focusing upon the relative price of housing for blacks because this overlooks how obstacles to black workers obtaining suburban accommodation concentrates the supply of black labour into comparatively declining inner city areas whereas kain argues that housing market discrimination reduces earnings net of travel costs by creating a spatial mismatch of workers and jobs the concern in this paper is that earnings net of travel costs are reduced because job market discrimination may increase average journey to work distance

search bargaining and employer discrimination this article analyzes becker s 1957 1971 theory of employer discrimination within a search and wage bargaining setting discriminatory firms pay workers who are discriminated against less and apply stricter hiring criteria to these workers the highest profits are realized by firms with a positive discrimination coefficient moreover once ownership and management are separated both highest profits and highest utility can be realized by firms with a positive discrimination coefficient thus market forces like entry or takeovers do not ensure that wage differentials due to employer discrimination disappear

an equilibrium search matching model of discrimination abstract a model in which firms have incomplete information about workers at the hiring stage is shown to entail discrimination as the unique stable equilibrium outcome even if no agents have a taste for discrimination and groups are ex ante identical groups which are discriminated against e g blacks women earn lower wages and endure longer unemployment spells

discrimination empirical evidence from the united states the study of discrimination received a major impetus in the 1960 s when increasing social attention focused upon race and gender differentials in market outcomes gary becker s the economics of discrimination 1957 strongly influenced empirical research by providing a definition of wage discrimination and suggesting a specific way in which it might operate during the following years new theories were developed and refined in an attempt to explain why there appears to be continued discrimination in spite of market forces presumably operating against it similarly a large amount of empirical work has been done to determine whether and how much discrimination actually exists and to a lesser extent to test the implications of the various theories even so the hope expressed by becker in the preface of the second edition 1971 that our understanding of discrimination would increase so rapidly that the materials in his book would become obsolete before another decade began has clearly not been fulfilled here we review what has been learned in the intervening years and suggest some fruitful directions for future research 1 the focus of this paper like that of most of the empirical research in this area is on determining the extent of discrimination rather than on testing alternative models of discrimination

endogenous growth and government debt the feasibility of the policy of perpetual debt financing given a particular path for expenditures and taxation has been questioned over the years sargent and wallace 17 argue that such a policy is not feasible in the sense that the debt gnp ratio will explode mccallum 8 and darby 2 argue that this policy will be feasible if and only if the long run growth rate of gnp exceeds the after tax real interest rate this particular condition was derived under the assumption of ricardian equivalence where the growth rate of gnp and the interest rate are exogenously given and are not affected by the path of debt miller and sargent 9 and weil 20 make the point that once the assumption of ricardian equivalence is dropped then simple comparisons of long run growth rates and interest rates are not sufficient to determine stability tirole 19 and o connell and zeldes 10 demonstrate in diamond s 3 model without ricardian equivalence that ponzi games such as this are feasible if and only if the economy is dynamically inefficient without debt all of these studies assume that the long run growth rate of gnp is exogenously given this assumption is particularly strong in the absence of ricardian equivalence in a separate literature a new generation of equilibrium growth models has recently been developed with positive sustained growth in the long run equilibrium in these models long run growth is endogenously determined rather than being imposed on the model as some exogenously given process 7 11 12 14 15 1 all of these models find some way of introducing increasing returns to scale into the neoclassical growth model and yet preserving the fact that it can be interpreted as a decentralized equilibrium this paper considers the feasibility of perpetual debt financing in an economy where the growth rate of gnp is endogenously determined and is a function of debt levels the model of endogenous growth presented here is a modified version of the one given in prescott and boyd 12 this particular model is chosen for two reasons first agents live for finite lengths of time so ricardian equivalence will not hold in general in this model also the production function is linear in the capital stock as will become clear below this implies that the equilibrium paths of the state variables can be characterized as first order linear difference equations

endogenous price stickiness trend inflation and macroeconomic stability previous studies show that higher trend inflation is more likely to induce indeterminacy of equilibrium in sticky price models based on micro evidence that each period a fraction of prices is kept unchanged this paper demonstrates that when the degree of price stickiness is endogenously determined in a calvo model indeterminacy caused by higher trend inflation is less likely a key factor for determinacy is the long run inflation elasticity of output implied by the new keynesian phillips curve this elasticity declines substantially with higher trend inflation in the case of exogenously given price stickiness whereas in the case of endogenous price stickiness the decline in the elasticity is mitigated because higher trend inflation leads to a higher probability of price adjustment

will affirmative action policies eliminate negative stereotypes a key question concerning affirmative action is whether the labor market gains it brings to minorities can continue without it becoming a permanent fixture in the labor market the authors argue that this depends on how the policy affects employers beliefs about the productivity of minority workers they study the joint determination of employer beliefs and worker productivity in a model of statistical discrimination in job assignments the authors prove that even when identifiable groups are equally endowed ex ante affirmative action can bring about a situation in which employers correctly perceive the groups to be unequally productive ex post copyright 1993 by american economic association

informal job search and black youth unemployment in this paper i analyze how young black and white unemployed jobseekers use various methods of search and the employment outcomes which result from their use the focus is on distinguishing informal search methods i e friends and relatives or direct application without referral from more formal ones in analyzing racial differences the results show that the two informal methods of search account for about 90 of the difference in employment probabilities between white and black youth this also accounts for 57 71 of the difference in unemployment rates between the two furthermore most of these results reflect differences in the ability of these methods to generate job offers as opposed to differences in search effort or job acceptance rates however our ability to explain these differences through personal family and household characteristics was generally quite limited this abstract was borrowed from another version of this item

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

job discrimination market forces and the invisibility hypothesis the invisibility hypothesis holds that the job skills of disadvantaged workers are not easily discovered by potential new employers but that promotion enhances visibility and alleviates this problem then at a competitive labor market equilibrium firms profit by hiding talented disadvantaged workers in low level jobs consequently those workers are paid less on average and promoted less often than others with the same education and ability as a result of the inefficient and discriminatory wage and promotion policies disadvantaged workers experience lower returns to investments in human capital than other workers

discrimination and job uncertainty abstract in this paper i incorporate group behaviour into a model of the labour market and show that discrimination can be the result of competition between coalitions of workers and bosses for jobs if the probability of correctly assessing the productivity of individual workers decreases coalition formation on the basis of recognisable characteristics becomes relatively more rewarding than coalition forming on the basis of productivity the conditions are under which each individual in the endogeneously defined group actively discriminates persons with different recognisable characteristics independent of productivity

a language theory of discrimination any advanced industrial society is composed of a number of speech communities with different verbal and nonverbal languages in particular in the united states blacks and whites and men and women have sharply differing methods of speaking and listening this paper develops a model in which people can only work together if they speak the same language and in which it is costly to learn a second language the competitive market will tend to minimize communication through segregation but if interaction is required the cost will be borne by the minority a number of nontrivial predictions are derived from the model

consumer discrimination and self employment self employment rates and incomes differ significantly by race we show that these differentials arise in markets with consumer discrimination and incomplete information about the price of the good and the race of the seller equilibrium income distributions have two properties mean black incomes are lower than mean white incomes and the returns to ability are lower for black than for white sellers able blacks therefore are less likely to self select into the self employment sector than able whites using the 1980 census data we find that observed racial differences in the self employment income distributions are consistent with the theoretical predictions

does long term unemployment reduce a person s chance of a job a time series test long term unemployed are less likely to leave unemployment than short term unemployed to what extent is this due to an effect of duration and to what extent to heterogeneity on reasonable assumptions heterogeneity on its own with no duration dependence would imply that if over time the exit rate of new entrants fell by a given multiple the overall exit rate from unemployment should fall by the same multiple however over the last twenty years in the uk the overall exit rate has fallen by 60 per cent more than the fall in the exit rate of new entrants another test of pure heterogeneity based on more general assumptions also fails hence we explain the overall fall in exit rates from unemployment by the combined effect of 1 a fall in the ratio of vacancies to unemployed and 2 a higher proportion of the unemployed being long term unemployed and hence demoralized and stigmatized in the eyes of employers

ranking unemployment duration and wages it explores the implication of one central assumption when firms receive multiple acceptable applications they hire the worker who has been unemployed for the least amount of time this assumption ranking is contrasted with the assumption of random hiring no ranking by embodying this assumption in a model of the labour market with job creation destruction and matching the joint behaviour of unemployment the distribution of unemployment durations and wages are characterized the implication that the re employment prospects of employed workers were they to become unemployed are better than those of the currently unemployed appears to have been an important feature of european unemployment experience in the 1980 s this paper examines the effects of the composition of unemployment on wage determination it explores one central assumption when firms receive multiple acceptable applications they hire the worker who has been unemployed for the least amount of time we refer to this assumption as ranking and contrast it throughout to the assumption of random hiring or no ranking by embodying this assumption in a model of the labour market with job creation destruction and matching we characterize the joint behaviour of unemployment the distribution of unemployment durations and wages ranking has a number of important implications first in addition to the obvious result that the exit rate from unemployment is a decreasing function of duration we show that the effect of duration is stronger the higher the rate of unemployment second with the wage depending on the distributions of prospective unemployment durations the presence of long term unemployed per se has little effect on wages third looking at the relation between the wage and the aggregate level of unemployment and comparing ranking to the case of no ranking the wage moves less with the level of unemployment but more with the change in unemployment put simply ranking and no ranking models show exactly the same aggregate unemployment slightly different long run responses of wages to unemployment and sharply different wage dynamics the paper is organized as follows section i characterizes the matching process and derives a matching function based on an urn ball process with vacancies as urns and applications by unemployed workers as balls thus the distribution of applications per vacancy depends on aggregate unemployment and vacancies vacancies with at least one acceptable application are filled when a vacancy receives more than one acceptable application firms use a rule to choose among applicants thus the rule determines who is hired but does not affect the number of hires section ii uses this matching function in a model of the labour market with continual job creation and destruction and characterizes the equilibrium values of unemployment vacancies and hires

does equal pay legislation reduce labour market inequality this paper considers a labour market model of monopsonistic competition with taste based discrimination against minority workers to study the effect of equal pay legislation on labour market inequality when the taste for discrimination is small or competition is weak the policy removes job segregation and the wage gap completely however with a bigger taste for discrimination or stronger competition equal pay legislation leads to more job segregation and sometimes minority workers end up earning less than before profits of discriminating firms might increase and discrimination can persist in the long run although it would have disappeared without the policy

no help wanted signs and the duration of job search in standard job search models the increased duration ofjob search in recessions is the result of workers failure to perceive the downward shift of the wage offer distribution they face an alternative explanation offered by okun i98i argues that the increase in no help wanted signs i e zero wage offers in recessions raises workers optimal duration of search since the increased duration of job search is explained without reference to faulty wage expectations unemployment does not automatically return to the natural rate as workers recognise the new wage offer distribution the effect of an increase in no help wanted signs a reduction in the probability of receiving a nonzero wage offer on the duration of search in sequential job search models is ambiguous in general barron i 975 this paper seeks to discover conditions under which such an increase raises the optimal duration of job search for this purpose a simple job search model with no help wanted signs is developed in the next section 2 section ii shows that if the distribution of wage offers is log concave the optimal duration of job search rises with increases in no help wanted signs other circumstances that yield this result are also examined the final section contains concluding remarks