This results in non-degenerate wage offer distributions for blacks and whites. Second, firms with a distaste for blacks hire black workers, but search less intensively for them than white workers. This allows the black unemployment rate to be affected by the presence of these firms as well. Within this model we examine the effect of equal pay legislation on the wage distributions and unemployment rates of blacks and whites. In the absence of such legislation firms optimize by offering blacks a lower wage than whites.
Blacks accept the lower wage offers because they face longer search durations.
In contrast to Black's model, initial analysis of our model reveals forcing firms to pay equal wages reduces, but does not eliminate, the black-white wage differential. This result is due to the non-degenerate nature of wage offer distributions in our model, as well as the fact that both the wage offer distributions and the racial workforce compositions differ across the two firm types.