Racial Disparity in Unemployment

Joseph Ritter and Lowell Taylor

The Review of Economics and Statistics, 2011, vol. 93, issue 1, 30-42

Abstract: In the United States, black workers earn less than their white counterparts and have higher rates of unemployment. Empirical work indicates that most of this wage gap is accounted for by differences in cognitive skills that emerge at an early age. In this paper, we demonstrate that the same is not true for black-white disparity in unemployment. A large unexplained unemployment differential motivates the paper's second contribution-—a potential theoretical explanation. This explanation is built around a model that embeds statistical discrimination into the subjective worker evaluation process that lies at the root of the efficiency-wage theory of equilibrium unemployment. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2011
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