Equal-treatment policy in a random search model with taste discrimination

Abstract

We consider a search model of the labor market with two types of equally productive workers and two types of firms, discriminators and non-discriminators. Without policy intervention, there is wage dispersion between and within the two worker groups, but all wage differences become negligible when the taste for discrimination is small. We analyze the effect of an equal-pay policy, both in combination with affirmative action and without. When equal opportunity of hiring cannot be enforced, wage dispersion increases and wages for minority workers fall substantially relative to laissez faire. Sometimes also the wage gap between worker groups widens in response to the policy.

A Tradable Employment Quota

“…As in Kaas (2009) and Kaas and Lu (2010) our simulation model generates employment segregation. The non-discriminating firms employ more women than men and the discriminating firms employ substantially more men.…”

“…the upgrading of skills of workers so that firms would comply to the affirmative action policy. Equal employment opportunities as one proliferation of affirmative action policies have been studied in the framework of a search and matching model of the labor market by Kaas and Lu (2010). They find that if an imperfectly monitored equal employment opportunity legislation is combined with an 7 equal pay obligation inequality increases.…”