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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

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A Short Note on Discrimination and Favoritism in the Labor Market

Nicolas Salamanca
  • Corresponding author
  • Melbourne Institute of Applied Economic and Social Research, University of Melbourne, Carlton, Victoria, Australia
  • Institute for the Study of Labor (IZA), Bonn, Nordrhein-Westfalen, Germany
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/ Jan Feld
  • School of Economics and Finance, Victoria University of Wellington, Wellington, New Zealand
  • Institute for the Study of Labor (IZA), Bonn, Nordrhein-Westfalen, Germany
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Published Online: 2016-11-17 | DOI: https://doi.org/10.1515/bejte-2016-0133


We extend Becker’s model of discrimination by allowing firms to have discriminatory and favoring preferences simultaneously. We draw the two-preference parallel for the marginal firm, illustrate the implications for wage differentials, and consider the implied long-run equilibrium. In the short-run, wage differentials depend on relative preferences. However, in the long-run, market forces drive out discriminatory but not favoring firms.

Keywords: wage gap; nepotism; firm preferences; long-run equilibrium

JEL Classification: J70; J31


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About the article

Published Online: 2016-11-17

Published in Print: 2017-01-01

Australian Research Council Centre of Excellence for Children and Families over the Life Course (Grant/Award Number: CE140100027).

Citation Information: The B.E. Journal of Theoretical Economics, Volume 17, Issue 1, 20160133, ISSN (Online) 1935-1704, ISSN (Print) 2194-6124, DOI: https://doi.org/10.1515/bejte-2016-0133.

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