Indirect Re–employment Wage Discrimination

Kostas Mavromaras

Bulletin of Economic Research, 2003, vol. 55, issue 1, 53-89

Abstract: This paper looks at unemployed individuals and investigates wage differences generated by re–employment selection. It shows that discriminatory re–employment selection can result, indirectly, in discriminatory re–employment pay. A Heckman two–stage selection model is combined with an extension of Gomulka–Stern non–linear decompositions to explain how re–employment selection generates indirect discrimination. The paper uses data from pre–unification Germany in the late 1980s and finds that female human capital suffers more from unemployment and that the market is harsher to males for becoming unemployed. New policies should encourage a regime where the hiring process is more transparent and hiring decisions are monitored on a regular basis.

Date: 2003
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