Employer Discrimination and Market Structure

26 Pages Posted: 1 Jun 2012

See all articles by Josh Ederington

Josh Ederington

University of Kentucky - Department of Economics

Jeremy Sandford

University of Kentucky - Department of Economics

Date Written: May 22, 2012

Abstract

We formalize Gary Becker's dynamic conjecture that competitive forces drive discriminating employers from the market in the long run, using a dynamic model of a monopolistically competitive industry characterized by sunk costs and sequential entry. An advantage of this formalization is that it demonstrates the importance of the structure of production costs, as well as market power, in explaining the long-run survival of discriminatory firms. In addition, we show that, despite decades of empirical research on this connection, there is actually no consistent theoretical relationship between the degree of market concentration within an industry and the degree of discrimination. However, we do find an indirect link in which market liberalization has a more pronounced effect in reducing discrimination in more concentrated markets.

Keywords: discrimination, Becker, market structure, competition

JEL Classification: J7

Suggested Citation

Ederington, Josh and Sandford, Jeremy, Employer Discrimination and Market Structure (May 22, 2012). Available at SSRN: https://ssrn.com/abstract=2071674 or http://dx.doi.org/10.2139/ssrn.2071674

Josh Ederington (Contact Author)

University of Kentucky - Department of Economics ( email )

335 Business and Economics Building
Lexington, KY 40506
United States

Jeremy Sandford

University of Kentucky - Department of Economics ( email )

Lexington, KY 40506
United States

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