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Discrimination and Skill Differences in an Equilibrium Search Model

Author

Listed:
  • Audra J. Bowlus

    (University of Western Ontario and Vrije Universiteit Amsterdam)

  • Zvi Eckstein

    (Tel Aviv University & Boston University)

Abstract
In this paper we analyze an equilibrium search model with threesources for wage andunemployment differentials among workers with the same (observed)human capital but different appearance (race): unobservedproductivity (skill), search intensities and discrimination (Becker 1957)due to an appearance-based employer disutility factor. Because theyaffect the earnings distributionsdifferently, empirical identification of these potential sources forthe explanation of wage and unemployment differentials is possible.We show that the structural parameters of the model, including thefirm's disutility from certain workers, are identifiable usingstandard labor market survey data. Wedemonstrate identification using data from the National LongitudinalSurvey of Youth. Estimation of these parameters by matching momentsfrom a sample of black and white high school graduates implies:blacks have a 9% lower productivity level than whites;the disutility factor in employer's preferences is one-third of thewhite's productivity level; and50% of firms have a disutility factor in their utility toward blacks.

Suggested Citation

  • Audra J. Bowlus & Zvi Eckstein, 1998. "Discrimination and Skill Differences in an Equilibrium Search Model," Tinbergen Institute Discussion Papers 98-112/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:19980112
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    References listed on IDEAS

    as
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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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