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American Economic Review Vol. 90 No. 1 2000

Endogenous Inequality in Integrated Labor Markets with Two-Sided Search

George J. Mailath1; Larry Samuelson2; Avner Shaked3

1 Department of Economics, University of Pennsylvania, 3718 Locust Walk, Philadelphia, PA 19104. · 2 Department of Economics, University of Wisconsin, 1180 Observatory Drive, Madison, WI 53706. · 3 Department of Economics, University of Bonn, Adenauerallee 24-26, D 53113 Bonn, Germany.

Abstract

We consider a market with “red” and “green” workers, where labels are payoff irrelevant. Workers may acquire skills. Skilled workers search for vacancies, while firms search for workers. A unique symmetric equilibrium exists in which color is irrelevant. There are also asymmetric equilibria in which firms search only for green workers, more green than red workers acquire skills, skilled green workers receive higher wages, and the unemployment rate is higher among skilled red workers. Discrimination between ex ante identical individuals arises in equilibrium, and yet firms have perfect information about their workers, and strictly prefer to hire minority workers.

DOI
10.1257/aer.90.1.46
Volume
90
Issue
1
Pages
46-72
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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