NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Discrimination and Worker Evaluation

Costas Cavounidis, Kevin Lang

NBER Working Paper No. 21612
Issued in October 2015
NBER Program(s):Labor Studies

We develop a model of self-sustaining discrimination in wages, coupled with higher unemployment and shorter employment duration among blacks. While white workers are hired and retained indefinitely without monitoring, black workers are monitored and fired if a negative signal is received. The fired workers, who return to the pool of job-seekers, lower the average productivity of black job-seekers, perpetuating the cycle of lower wages and discriminatory monitoring. Under suitable parameter values the model has two steady states, one corresponding to each population group. Discrimination can persist even if the productivity of blacks exceeds that of whites.

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Document Object Identifier (DOI): 10.3386/w21612

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