Statistical discrimination in the labor market: Public policy and empirical evidence
Statistical discrimination in the labor market occurs when employers have only incomplete information about workers' productivity, and use aggregate statistics to make their decisions. This dissertation expands our understanding of how statistical discrimination is generated, explains how public policy can affect it, and explores to what extent race differentials in the U.S. have been generated by this source. After the introductory chapter, the second chapter, Affirmative Action in a Competitive Economy (joint with Peter Norman), analyzes how incentives for human capital acquisition are affected by affirmative action in a model of statistical discrimination with endogenous human capital. It is shown that affirmative action can fail, in the sense that there may still be discrimination in equilibrium. However, the incentives for agents in the disadvantaged group to invest are better in any equilibrium under affirmative action than in the most discriminatory equilibrium without the policy. The welfare effects are ambiguous: it is demonstrated that the policy may hurt the intended beneficiaries even when the initial equilibrium is the worst equilibrium for the targeted group. The third chapter, The Effects of Statistical Discrimination on Black-White Wage Differentials: Estimating a Model with Multiple Equilibria, structurally estimates an extension of the model presented in the second chapter. Although the model is capable of displaying multiple equilibria, an estimation strategy that identifies both the fundamental parameters and the equilibrium selected by the agents is developed. The model is estimated using U.S. black and white male wage data from 1963 to 1992. In addition to recovering the selected equilibrium, all the equilibria that the model could have displayed are computed. A comparison between the equilibria that were selected over-time and the other potential equilibria reveals that the outcome with essentially the lowest wage inequality have always been selected. This implies that self-fulfilling expectations did not exacerbate wage differentials in the U.S. and that the decline in wage inequality experienced in the U.S. in the last decades cannot be attributed to changes in the equilibrium selection.
Year of publication: |
1998-01-01
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Authors: | Moro, Andrea |
Publisher: |
ScholarlyCommons |
Saved in:
freely available
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