Discrimination,technology and unemployment |
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Authors: | Luca Paolo Merlino |
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Institution: | 1. University of Duisburg-Essen, General Psychology: Cognition and Center for Behavioral Addiction Research, Duisburg, Germany;2. Erwin L. Hahn Institute for Magnetic Resonance Imaging, Essen, Germany |
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Abstract: | I study the interaction between discrimination and investment using a directed search model where firms decide the capital intensity of their production technologies before being matched. Discrimination makes some workers cheap to hire. As a consequence, some firms might save on capital costs adopting labour intensive technologies. This framework allows one to reconcile search models with three well-known facts regarding the labour market outcomes of minority workers: low wages, high unemployment and occupational segregation. Furthermore, the model questions the role of equal pay legislation in reducing inequality since removing this restriction, i.e., allowing firms to post type-contingent wages, eliminates the negative effects of discrimination on investment and wages. |
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