Working Paper: NBER ID: w17450
Authors: Kevin Lang; Jeeyeon K. Lehmann
Abstract: 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.
Keywords: racial discrimination; labor market; wage differentials; employment differentials
JEL Codes: J31; J64; J71
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| racial discrimination in the labor market (J70) | wage differentials between black and white workers (J31) |
| racial discrimination in the labor market (J70) | employment differentials between black and white workers (J79) |
| taste-based discrimination models (J79) | wage differentials for black workers (J31) |
| taste-based discrimination models (J79) | longer unemployment durations for black workers (J65) |
| statistical discrimination models (C52) | wage differentials based on observable productivity (J31) |
| statistical discrimination models (C52) | failure to account for employment rates (J68) |
| unemployment rate for black men (J64) | unemployment rate for white men (J79) |
| duration of unemployment spells for black men (J64) | duration of unemployment spells for white men (J64) |
| black-white wage gap (J31) | skill level (J24) |
| black-white wage gap among high-skill workers (J31) | significant gap (I24) |