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Journal of Economic Literature: Vol. 50 No. 4 (December 2012)

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Racial Discrimination in the Labor Market: Theory and Empirics

Article Citation

Lang, Kevin, and Jee-Yeon K. Lehmann. 2012. "Racial Discrimination in the Labor Market: Theory and Empirics." Journal of Economic Literature, 50(4): 959-1006.

DOI: 10.1257/jel.50.4.959

Abstract

We review theories of race discrimination in the labor market. Taste-based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread, but no existing model explains the unemployment rate differential. Models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment. At their current state of development, models of statistical discrimination based on rational stereotypes have little empirical content. It is plausible that models combining elements of the search models with statistical discrimination could fit the data. We suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy. (JEL J15, J31, J64, J71)

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Authors

Lang, Kevin (Boston U and IZA, Bonn)
Lehmann, Jee-Yeon K. (U Houston)

JEL Classifications

J15: Economics of Minorities, Races, and Immigrants; Non-labor Discrimination
J31: Wage Level and Structure; Wage Differentials
J64: Unemployment: Models, Duration, Incidence, and Job Search
J71: Labor Discrimination


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