‘IF YOU BELIEVE THAT DISCRIMINATION EXISTS, IT WILL’*†

Ali M. Ahmed

Manchester School, 2008, vol. 76, issue 6, 613-628

Abstract: A model is presented where identical firms announce vacancies and wages and workers apply to the firm. Workers are of two types, b and g, but identical in productivity. Firms do not prefer a particular type of worker over another; however, a common belief among all workers is that type b workers are discriminated against. This causes type b workers to avoid applying for jobs that offer wages perceived to be too high. In equilibrium some firms announce high wages thereby attracting only type g workers, while others announce low wages thereby attracting only type b workers.

Date: 2008
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