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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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1935-1704
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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

Abstract

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

References

  • Allport, G. W. 1954. The Nature of Prejudice. Cambridge, MA: Addison-Wesley.Google Scholar

  • Becker, G. S. 1957. The Economics of Discrimination. Chicago, IL: University of Chicago Press.Google Scholar

  • Cahuc, P., S. Carcillo, and A. Zylberberg. 2014. Labor Economics. Cambridge, MA: MIT Press.Google Scholar

  • Charles, K. K., and J. Guryan. 2008. “Prejudice and Wages: An Empirical Assessment of Becker’s the Economics of Discrimination.” Journal of Political Economy 116 (5):773–809.Web of ScienceCrossrefGoogle Scholar

  • Edo, A., N. Jacquemet, and C. Yannelis. 2015. “Language Skills and Homophilous Hiring Discrimination: Evidence from Gender-and Racially-Differentiated Applications.” Unpublished manuscript.

  • Ehrenberg, R. G., and R. S. Smith. 2009. Modern Labor Economics: Theory and Public Policy. Boston, MA: Pearson/Addison-Wesley.Google Scholar

  • Feld, J., N. Salamanca, and D. S. Hamermesh. 2016. “Endophilia or Exophobia: Beyond Discrimination“. The Economic Journal 126:1503–27.Google Scholar

  • Fershtman, C., U. Gneezy, and F. Verboven. 2005. “Discrimination and Nepotism: The Efficiency of the Anonymity Rule.” The Journal of Legal Studies 34 (2):371–96.CrossrefGoogle Scholar

  • Goldberg, M. S.. 1982. “Discrimination, Nepotism, and Long-Run Wage Differentials.” The Quarterly Journal of Economics 97 (2):307–19.CrossrefGoogle Scholar

  • Jacquemet, N., and C. Yannelis. 2012. “Indiscriminate Discrimination: A Correspondence Test for Ethnic Homophily in the Chicago Labor Market.” Labour Economics 19 (6):824–32.CrossrefWeb of ScienceGoogle Scholar

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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