Measuring the Welfare Costs of Racial Discrimination in the Labor Market
Ημερομηνία
2023-04Source
Economic InquiryVolume
61Issue
2Pages
232-252Google Scholar check
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Εμφάνιση πλήρους εγγραφήςΕπιτομή
We find that the conditional wage-gap for non-whites is negatively related to gross domestic product per worker across the US. To explain this, we develop a model linking unequal access to employment with the wage gap, labor misallocation, and income loss. The presence of underprivileged workers allows inefficient firms to co-exist with efficient ones and leads to skill misallocation, higher unemployment and lower output. Calibrating the model to match the US, we find a fall in market-based racial discrimination renders inefficient firms non-profitable, causing reallocation of labor and a positive effect on income as high as 4 percent when discrimination is eliminated.