Discrimination in the Equilibrium Search Model with Wage-Tenure Contracts
Date of Issue2013
College of Humanities, Arts, and Social Sciences
This paper extends Burdett and Coles (2003)’s search model to two types of workers and firms and derives the equilibrium earnings distributions for both types of workers. It is proven that minority workers have a higher unemployment rate than majority workers; discriminating firms make lower profit than non-discriminating firms; offers to minority workers by non-discriminating firms are consistently superior to those by discriminating firms, and at the same wage level, majority workers almost always experience a faster wage increase than the minority workers.
Annals of Economics and Finance
© 2013 The Authors (published by Peking University Press). This paper was published in Annals of Economics and Finance and is made available as an electronic reprint (preprint) with permission of Peking University Press. The published version is available at: [http://aeconf.com/nov2013.htm]. One print or electronic copy may be made for personal use only. Systematic or multiple reproduction, distribution to multiple locations via electronic or other means, duplication of any material in this paper for a fee or for commercial purposes, or modification of the content of the paper is prohibited and is subject to penalties under law.