Racial Wage Discrimination and Industrial Structure

William Johnson

Bell Journal of Economics, 1978, vol. 9, issue 1, 70-81

Abstract: This paper estimates racial wage discrimination by industry with a large sample of data on individual worker characteristics, industry of employment, and wages. Governments, regulated industries, and nonprofit organizations as a group discriminate less in wages than other employers, though much of the difference is due to the behavior of the government as the employer. These results appear to contradict the employer-taste models of discrimination associated with Becker and Alchian-Kessel, which assert that cost-minimizing employers will discriminate less than employers not under strict cost-minimizing discipline. However, it is argued that these models are not theories of wage discrimination, but rather of employment discrimination by firms. An alternative hypothesis is proposed in which only employers free of cost-minimizing constraints can afford to pay blacks more than the possibly discriminatory market wage for blacks. These firms are likely, also, to be subject to the greatest pressures from government antidiscrimination policy.

Date: 1978
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