TY - JOUR
T1 - Wage differentials, discrimination and efficiency
AU - Shi, Shouyong
N1 - Funding Information:
I thank two referees and an editor for valuable comments. I have also received comments from Mike Peters, Rob Shimer, Peter Norman, Audra Bowlus, and Michael Baker. I gratefully acknowledge the financial support from the Bank of Canada Fellowship and from the Social Sciences and Humanities Research Council of Canada. The opinion expressed here is my own and it does not represent the view of the Bank of Canada.
PY - 2006/5
Y1 - 2006/5
N2 - I analyze a large labor market where homogeneous firms post wages to direct the search of workers who differ in productivity. I show that the model has a unique equilibrium. The wage differential depends positively on the workers' productivity differential only when the latter is large. When the productivity differential is small, high-productivity workers get a lower wage than low-productivity workers. This reverse wage differential remains even when the productivity differential shrinks to zero. However, the equilibrium is socially efficient. High-productivity workers always get the employment priority and higher expected wages than low-productivity workers. Although discrimination in terms of expected wages does not exist, conventional measures are likely to incorrectly find discrimination in the model.
AB - I analyze a large labor market where homogeneous firms post wages to direct the search of workers who differ in productivity. I show that the model has a unique equilibrium. The wage differential depends positively on the workers' productivity differential only when the latter is large. When the productivity differential is small, high-productivity workers get a lower wage than low-productivity workers. This reverse wage differential remains even when the productivity differential shrinks to zero. However, the equilibrium is socially efficient. High-productivity workers always get the employment priority and higher expected wages than low-productivity workers. Although discrimination in terms of expected wages does not exist, conventional measures are likely to incorrectly find discrimination in the model.
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U2 - 10.1016/j.euroecorev.2006.01.002
DO - 10.1016/j.euroecorev.2006.01.002
M3 - Article
AN - SCOPUS:33646182261
SN - 0014-2921
VL - 50
SP - 849
EP - 875
JO - European Economic Review
JF - European Economic Review
IS - 4
ER -