Competition, Efficiency, and Discrimination in Job Markets With Learning

Gian Luca Carniglia and Mauricio Ribeiro

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: Will competition between firms in the job market increase efficiency and reduce discrimination? We show that when the worker’s productivity is unknown and the minimum wage is not too low, competition can lead to a constrained-inefficient and discriminatory outcome. Under these conditions, competition creates a hold-up problem that reduces the firm’s incentives to experiment, generating inefficiency. Since competition amplifies this hold-up problem, workers of social groups that face greater informational disadvantages are more likely to remain unemployed as competition increases, increasing discrimination

Date: 2025-04-02
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