Discrimination and Worker Evaluation
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.
This research was funded in part by NSF grant SES-1260917. We are grateful to Gautam Bose, Sambuddha Ghosh, Larry Katz, Ed Lazear, Calvin Luscombe, Ioana Marinescu, Derek Neal, Marina Soley-Bori, Bill Spriggs and participants in the theory workshop at Boston University and the NBER Summer Institute (Labor Studies/Personnel) for helpful comments and suggestions. The usual caveat applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.