Working Paper: NBER ID: w21612
Authors: Costas Cavounidis; Kevin Lang
Abstract: We develop a model of self-sustaining discrimination in wages, coupled with higher unemployment and shorter employment duration among blacks. While white workers are hired and retained indefinitely without monitoring, black workers are monitored and fired if a negative signal is received. The fired workers, who return to the pool of job-seekers, lower the average productivity of black job-seekers, perpetuating the cycle of lower wages and discriminatory monitoring. Under suitable parameter values the model has two steady states, one corresponding to each population group. Discrimination can persist even if the productivity of blacks exceeds that of whites.
Keywords: discrimination; labor market; wages; unemployment
JEL Codes: J71
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| race (J15) | monitoring practices (C90) |
| monitoring practices (C90) | employment duration (C41) |
| monitoring practices (C90) | wage outcomes (J31) |
| race (J15) | likelihood of being fired (J63) |
| likelihood of being fired (J63) | lower productivity (O49) |
| lower productivity (O49) | higher unemployment rates (J64) |
| higher unemployment rates (J64) | lower quality of black unemployment pool (J79) |
| race (J15) | lower-paying jobs (J31) |
| shorter employment durations (J63) | relegation to lower-paying jobs (J62) |