Chapter 11

# Discrimination 1: Theory

## Quantitative Problems

1. Both Dougal and George Clooney are perfectly capable of posing in front of a camera for next year's calendar. Yet, alas poor plain Dougal would earn next to nothing for his efforts, while George would be handsomely rewarded. Does this reflect discrimination? |

2. Assume that employers are not prejudiced. Outline the effects of coworker discrimination upon the labor-market outcomes of minority workers. Under what circumstances would employers hire a mixed workforce? What are the implications for the wages of majority workers if they do? |

3. (a) What is the labor-market outcome in the absence of any discrimination? – Let δe denote the coefficient of discrimination, and let V(δ) denote the fraction of job slots for which .(b) Assume that . How many unprejudiced job openings are there? What is the most prejudiced firm's coefficient of discrimination? Finally, how prejudiced is the median employer? (c) What is the equilibrium wage of White workers? Characterize the labor-market equilibrium for Black workers. Is there discrimination against them? (d) Comment on the equilibrium marginal employer's prejudice when compared with the prejudice of the median firm. Suppose that the labor market is competitive and there are a total of 1,000 Black workers and 1,000 White workers (who each supply their labor inelastically). Both Black and White workers are equally materially productive, having constant individual dollar productivities of $180. Finally, there are a total of job slots. |

4. Let denote the coefficient of consumer discrimination. What would imply about a particular consumer? |

5. Suppose that Black and White workers have constant equal material productivities of 200 apiece. Assume that each unit of output produced by White workers sells for p = $10. Suppose, however, that consumers are prejudiced and that they each have a coefficient of discrimination of . Assuming that neither employers nor coworkers are prejudiced, what is the equilibrium Black wage? Are there any obvious economic forces that will narrow the wage gap in the long run? |

6. Is Becker's model of employer discrimination consistent with persistent discrimination? |

7. Under statistical discrimination earnings may depend on a worker's group affiliation, such as race or gender. Does the use of this information constitute prejudicial discrimination? |

8. What is meant by the "Acting White" phenomenon and why does it arise? |

9. Explain why discrimination can result from a vicious cycle, driven by correctly held beliefs concerning the relative productivities of White and Black workers. |

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