On the Degree and Consequences of Talent Misallocation for the United States

Almarina Gramozi (), Theodore Palivos and Marios Zachariadis

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: We develop a search and matching model linking unequal access to employment with wage gaps, labor misallocation, and income losses. We then use microeconomic data for millions of individuals across the United States over the period from 1960 to 2017, to explore the misallocation effects arising due to frictions related to race and gender and to quantify their impact on aggregate economic outcomes. We systematically find that women and non-whites receive lower wages compared to their counterparts with similar individual characteristics. Within our theoretical model, such wage gaps coexist with talent misallocation due to the presence of workers that are underprivileged as a result of their gender or race. State-level misallocation implied by our estimated wage gaps is negatively related to productivity and output at the state level over the period under study. Furthermore, calibrating the theoretical model to match the US economy, we find that a fall in white privilege has a sizeable positive effect on aggregate income.

Keywords: Economic growth; inefficiencies; wage gaps; race; gender. (search for similar items in EconPapers)
JEL-codes: E0 J31 O4 O51 (search for similar items in EconPapers)
Pages: 92 pages
Date: 2020-12
New Economics Papers: this item is included in nep-dge, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:09-2020

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