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Discrimination

Discrimination. Becker : Economics of Discrimination 3 potential sources : 1) employers : most important source of discrimination 2) employees : who willing to work alongside? 3) customers: who willing to buy from or sit next to?. Employer Discrimination. Set up discussion :

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Discrimination

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  1. Discrimination • Becker: Economics of Discrimination • 3 potential sources: • 1) employers: most important source of discrimination • 2) employees: who willing to work alongside? • 3) customers: who willing to buy from or sit next to?

  2. Employer Discrimination • Set up discussion: • Males are majority group (M); • Females are minority group (F). • M employers discriminate against F employees. • Discrimination coefficient = d = monetary equivalent of the prejudice. If actual hourly wage = w, then this discriminating employer views the wage “he” must pay as w + d. • Example: w = $5; d = $1, so employer views wage as $6, which includes monetary component plus a disutility component.

  3. Employer Discrimination (cont.) • Further details when d  0 and same for all firms: • Market will favor male employees. • F only get job if their wage (Wf+d)  Wm; otherwise only men hired. • But what if different employers have different d? • Employer with no prejudice has d = 0; d  for more discriminatory firms. • Then some employers will hire women. • These less discriminating employers have competitive advantage. • See Table 5.

  4. Results of Discrimination • Result of discrimination: • In equilibrium, women earn less than they would earn in absence of discrimination. • LR: competition should  d to 0. • Firms hiring women have lower labor costs then firms hiring just men, so firms with women have higher profits. • Discrimination is inconsistent with profit-maximization. • So why doesn’t discrimination disappear? D  to 0 requires: • Enough potential firms with zero d. • Freedom of firm entry.

  5. Professional Baseball as Example • Until 1947, every player in Major League Baseball was white: • All owners had such high d’s that zero African Americans were hired. • Also had discrimination on part of “customers” so more complicated. • Why persisted? • Industry lacked freedom of entry. • Negro Baseball League created. • In 1947, Major League Baseball race “color line” was broken: • Brooklyn Dodgers signed Jackie Robinson (BD exploited their low d). • Within 10 years—all teams integrated.

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