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Racial Discrimination in the U.S. Labor Market: Employment and Wage Differentials by Skill

Author

Listed:
  • Daniel Borowczyk-Martins

    (University of Bristol [Bristol])

  • Jake Bradley

    (University of Bristol [Bristol])

  • Linas Tarasonis

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract
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. Lang and Lehmann (2012) argue that these mean differences mask substantial heterogeneity along the distribution of workers' skill. In particular, they argue that black-white 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 estimate the model with US data using methods of indirect inference. Our quantitative results portray the degree of employer prejudice in the US labor market as being strong and widespread, and provide evidence of an important skill gap between black and white workers. We use the model to undertake a structural decomposition and conclude that discrimination resulting from employer prejudice is quantitatively more important than skill differences to explain wage and employment gaps. In the final section of the paper we conduct a number of counterfactual experiments to assess the effectiveness of different policy approaches aimed at reducing racial differences in labor market outcomes.

Suggested Citation

  • Daniel Borowczyk-Martins & Jake Bradley & Linas Tarasonis, 2014. "Racial Discrimination in the U.S. Labor Market: Employment and Wage Differentials by Skill," Working Papers halshs-00989748, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00989748
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00989748
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    References listed on IDEAS

    as
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    1. Racial Discrimination in the U.S. Labor Market: Employment and Wage Differentials by Skill
      by Christian Zimmermann in NEP-DGE blog on 2014-05-28 18:29:47

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    2. Kuhelika De & Ryan A. Compton & Daniel C. Giedeman & Gary A. Hoover, 2019. "Macroeconomic Shocks and Racial Labour Market Differences in the U.S," CESifo Working Paper Series 8004, CESifo.
    3. Bustelo, Monserrat & Flabbi, Luca & Piras, Claudia & Tejada, Mauricio, 2019. "Female Labor Force Participation, Labor Market Dynamic and Growth in LAC," IDB Publications (Working Papers) 9420, Inter-American Development Bank.
    4. Matteo Bobba & Luca Flabbi & Santiago Levy, 2022. "Labor Market Search, Informality, And Schooling Investments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 211-259, February.
    5. Melitz, Jacques & Toubal, Farid, 2018. "Somatic distance, cultural affinities, trust and trade," CEPR Discussion Papers 12895, C.E.P.R. Discussion Papers.
    6. Jacques Melitz & Farid Toubal, 2019. "Somatic distance, trust and trade," Review of International Economics, Wiley Blackwell, vol. 27(3), pages 786-802, August.
    7. Bruno Decreuse & Linas Tarasonis, 2016. "Statistical Discrimination in a Search Equilibrium Model: Racial Wage and Employment Disparities in the US," Working Papers halshs-01327961, HAL.
    8. Scott David WILLIAMS, 2020. "A Textual Analysis Of Racial Considerations In Human Resource Analytics Vendors’ Marketing," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 12(4), pages 49-63, December.
    9. Almarina Gramozi & Theodore Palivos & Marios Zachariadis, 2020. "On the Degree and Consequences of Talent Misallocation for the United States," University of Cyprus Working Papers in Economics 09-2020, University of Cyprus Department of Economics.
    10. Kuhelika De & Ryan A. Compton & Daniel C. Giedeman & Gary A. Hoover, 2021. "Macroeconomic shocks and racial labor market differences," Southern Economic Journal, John Wiley & Sons, vol. 88(2), pages 680-704, October.
    11. Almarina Gramozi & Theodore Palivos & Marios Zachariadis, 2023. "Measuring the welfare costs of racial discrimination in the labor market," Economic Inquiry, Western Economic Association International, vol. 61(2), pages 232-252, April.
    12. Forsythe, Eliza & Wu, Jhih-Chian, 2021. "Explaining Demographic Heterogeneity in Cyclical Unemployment," Labour Economics, Elsevier, vol. 69(C).
    13. Christian E. Weller & Connor Maxwell & Danyelle Solomon, 2021. "Simulating How Large Policy Proposals Affect the Black-White Wealth Gap," Journal of Economics, Race, and Policy, Springer, vol. 4(3), pages 196-213, September.
    14. Bruno Decreuse & Linas Tarasonis, 2021. "Statistical Discrimination in a Search Equilibrium Model: Racial Wage and Employment Disparities in the US," Annals of Economics and Statistics, GENES, issue 143, pages 105-136.
    15. Thanh-Tam Nguyen-Huu, 2021. "Do “inferior” jobs always suffer from a wage penalty? Evidence from temporary workers in Cambodia and Pakistan," Post-Print hal-04248181, HAL.
    16. Moradi, Pegah, 2019. "Race, Ethnicity, and the Future of Work," SocArXiv e37cu, Center for Open Science.
    17. Claudia Williamson Kramer, 2023. "Individualism and racial tolerance," Public Choice, Springer, vol. 197(3), pages 347-370, December.

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    More about this item

    Keywords

    employment and wage differentials; discrimination; job search;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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