SEMINAR TORSDAG den 26. september 2013
Racial Discrimination in the US Labor Market: Employment and Wage Differentials by Skill,
Abstract
It is well-known that in the US labor market the average black worker is exposed to a lower employment rate and earns a lower wage compared to his white counterpart. Less attention has been given to the profile of these differences along workers’ skill distribution. Lang and Lehmann (2012) argue that wage and employment gaps are smaller for high-skill workers. In this paper we show that a model of employer taste-based discrimination in a labor market characterized by search frictions and skill complementarities in production can replicate these regularities. We build on Shimer and Smith (2000) and assume that a positive share of employers are prejudiced against workers of a certain race. The model generates sorting along two dimensions: race/prejudice and skill. We estimate the model with US data using simulated method of moments. Our quantitative results portray the degree of employer prejudice in the US labor market as being strong and widespread. We also find that the ability distributions of black and white workers differ somewhat, but this explains little of the observed racial variation in labor market outcomes.
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