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Author: Gonzalez-Martinez, Claudia Alejandra
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1. Gonzalez-Martinez, Claudia Alejandra
Racial Discrimination And Costs of Labor Force Participation
Ph.D. Dissertation, The University of Wisconsin - Madison, 2003. DAI-A 64/11, p. 4153, May 2004
Cohort(s): NLSY79
Publisher: UMI - University Microfilms, Bell and Howell Information and Learning
Keyword(s): Discrimination; Discrimination, Employer; Educational Attainment; Endogeneity; Hispanics; Labor Force Participation; Labor Market Demographics; Modeling; Skills; Wage Determination; Wage Differentials; Wage Models

Most explanations for persistent discrimination rely on the observability of productive characteristics. It has been assumed that constructing accurate ability assessments is harder when employer and employee belong to different groups. Thus, if employers are dominated by one demographic type, a different wage schedule for each group results. Previous studies have failed to consider costs of labor force participation. The introduction of these costs leads to a fall in the mean productivity of workers as their signals become noisier. My dissertation develops and tests a statistical discrimination model that internalizes these costs. The first chapter develops a static model of statistical discrimination where, as the result of an outside alternative and a sunk investment in education, minorities are paid lower wages. The second chapter presents four extensions to the model. The first two consider costs of participation that are a function of ability. The third considers several levels of education. The fourth recognizes that the discriminatory outcome is the result of informational disparities because employers belong to a single group. Hence, I endogenize the decision of becoming a firm. If the presence of minorities in the population is large enough, discrimination disappears. However, since complete segregation is not sustainable, if minorities are a small proportion of the population, this group may exhibit lower average productivity than the dominant type in the labor force. The empirical predictions are that, conditional on facing the same costs, minorities are more likely to graduate from high school and are paid lower and flatter wage schedules. The third chapter explores these predictions using data from the National Longitudinal Survey of Youth (NLSY79). Evidence that low ability blacks and Hispanics are more likely to complete high school than comparable whites is found. Regressions of the logarithm of wages conditional on skills, shown that blacks receive lower wages than the other two groups. Hispanics are paid flatter wages than whites, but the Hispanic-white wage gap is totally accounted for by skill differences. These findings are consistent with a model of statistical discrimination with costly labor market entry.
Bibliography Citation
Gonzalez-Martinez, Claudia Alejandra. Racial Discrimination And Costs of Labor Force Participation. Ph.D. Dissertation, The University of Wisconsin - Madison, 2003. DAI-A 64/11, p. 4153, May 2004.