the theory of discrimination

7/27/2019 The Theory of Discrimination

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Annals of Economics and Finance

Forthcoming Article



l, Ituction

HE THEOY O DSNON

by

Kenneth J rro

fct tht ifferent roups of orkers be they skied or

u ie bck nd hite or me nd feme receive different wes

ites the expntion tht the different roups must differ ccordin

e chrcteistic vued on the mrket n stndrd economic theoy

think first of of differences in productivity he notion of

cinti invoves the dition concept tht person chrcteristic

f the rker tht re unreted to productivity re so vued on the

rket uch person chrcteritics s rce ethnic bcround nd

e hve been freuenty dduced in this context

icrimintion in this pper is considered ony s it ppers on

h rket Obviousy one cn hve iscrimintion in the sme sense henever ecisions re mde tt conce other individus nmey tht

thei person chrcteristics other thn those proper reevnt enter

int the decision eiberte rci seretion nd discrimintion in

tnce to schoos nd coees deprivtion of the riht to vote on

soci n sexu ines nd discrimintory txtion re exmpes

f iscrimintion in nonmrket discrimintion

t y s e be dmitted tht te tem discrimintion s

ue impictions tht cn never be competey erdicted thouh they

cn be steriied for specific empiric nd descriptive nyses



I v p ken f pers onl c hrcterstcs tht re " unrelted t o pro-

i n n "pope eevnt " Thee tem mpy defnton

f du nd f eevnc hch e themeve vue udent o t

t den by the cho The bck tee ke my be thouht

pducn bckn e tee both evted n the mket

e nn t the fome pec b ect fo ny becue

eh e thnk t ppopte fo the tee ndty to podce tee

nd nt f t to podce bck o hte ok foce

Hoeve the ve dment e ntnc ony n detenn hch

ge dffeence e ed oth tudyn n exmpe of dcmnton

in the empc o theoetc ny of ny fom of dcmnton

nce pecfed

n the foon dde myef pecfcy to c

ntn n the bo mket o the mot pt the ny

tnd th no dffcty t ex dcmnton th oe eeton

be noted The the mket n hch dcmnton h been mot

eved epecy houn bt o nunce nd cpt e nyed

b he me ene method bt the opton of thee mket h ed

ete deee of mpe excon nd e of pce dffeent

The bc m hee to e f pobe neocc too n

h ny of dcmnton be een even thoh the b

mpton of utty nd pof tmxmton e y

ned mny of the u umpton be exed t one pont o

nthe convexty of ndffeence fce cote dutment



3

n• iati , perfect ca ptal maret. A I wll ty t h w,

th�· o et of each of these assumpti ons is motivate d by a clearly

pg ea n the theetca tcte f the bject enay, v h a many the ecnmc phenmena f the expanatn f

h ah f the aumpt mt be abandned, that the tep p he ae t ad hc anaye f the cae at hand but hd be at emet n a gnea they capabe f anayng he

t f a fact n ecnmc behav wtht ethe ng th

unfatve categy f mpefectn jmpng t a pecp-

jetn f neca they wth a t anaytc pwe

he ft appcatn f necaca they t dcmnatn that

I f that f dgewth [9], bt the man tdy t date ha

that f Bece [959] The anay t be peented hee appea

thna f w 97] It ee t devep fthe

de and eate the me ey t the they f eneapttve eqb thgh feqenty by way f cntat athe

ha ageement

e I a peentng hee the they f dcnatn n the ab

at ad nt the ente they f aca dffeence n ncme

tat fm dffeee n pdctvty bewee the gp f we

I a empa td t w be neceay t aw f th pbty

I the cae f bac and whte, me pbe cae f pdctvty

fence have been etabhed dffeence n edcatna qantty

quaty fa e, and hehd headed by wman ee Dncan [ ])



-4-

he suised cutuy vrying ttitudes tord ok nd

eienin deived fom the heritge of svery nd othe

ic fs hese differences themseves my be the rest

iciminin in othe es of ife t fr theoretic nysis

isciminion in the br mrket, it is egitite to sse tht

e e t goups f okers, to be denoted by nd W hih re

efec substitutes in prodction

the simpest mode, then, e hve rge nmbe of firs

ucing the sme product ith the sme prodction fntion Disriintion en ht some economi gent hs some negtive vtion for or positive

ution f W o both, vtion fo hich he is iing to py nd

h he ppotnity to py he gents ho cod possiby disrimint re

he epoyer, h might srifie profits to rede or eiminte

mpyment in his pnt, o the W orkers ho might cept oer ge t

k in pnt ith more W nd ess orkers t is so possibe for

ucts sod on feto-fe bsis, tht stomers miht disciminte

eing iing to py higher pries to buy from hites this cse cod

e udied ong siir ines bt i not be det ith here) Not

disciminty feeings cn find expression in the mket n

ntepeneu ho hs distste for ompeting ginst fims ith orkers

h n y ithin the eonomi system t est of expressing his tstes

n heefore f infenin ge eves.

hugh my conern here is ith discrmintion nd not ith prodctivityiffeences ms note my skeptiism bot the feentymde rgumenth cks hve esser ftreorienttion. or this disregds the e

no ft tht of y grop inome eve bks sve t est s much sites



-5-

e tt, gve te tate, te maret wok mooty. eera

ulr requre fu empoymet of ot B ad W woker te wae

t ll d ut to ea te maket, ad te dmato tate

wll rfleted wag dfferee

t u jut der te mpet ae, tat w te empoe

rte. e e aept a trade-off betwee poft, ad te er f B ad W poyee. Tat , w uppoe e eek to maxme,

rft, but utty futo, U B, W) We ae to et te I

lt e tat tee oy oe type of abo te ot u ,

l t ta a gve, o tat utput f (B) , e te tw

f ar are pefet ubttute (at a ato) . f we take output

uer e te poft ae e by te expeo

(

er W

d B

are te wae ate, take a gve by te empoe f

reed a ovetoa e te emoe euate te maa

rdutvty of ea ad of abo to te pe to m. But ee te

r" f B abo te maket pe W B l te pe te empoyer

lg t pay, tem of poft, fo edu B abo foe by

. eod tem wat Beke a temed te dmato

ffet, to be degated a B t te eate of te maa

rte f ubttuto of poft fo B abo f a we uuay uppoe,

te rga utty of B abo eatve, te te dmato

effet, d B pote



ul

dLwere dB • - M n•B Si miarly,

-

(2)

(3)

s egve (or ero f e employe a o pove k

v W ke)L

erhgeble

) d 3

Bu we ae aumg

poduo o H

d dW B

d B or

w w d W B B ,

e wo ype of abo

B

ay Te,

eulr eque a W wae exeed B wa, a m be

d

F r h mome, ume a fs ave e ame uy fuo,

U B W) e appe eaoabl o aume a a e e

m us of B ad (bu we w eu o po e ex

o) Te e f abor foe e ame, ad e oao

lor effe Te effe of dmao ae puey d

uve. Te mo obvou mpao e a B worke e pad

ls h her maga podu, o a e W wokes ad empoye

ghr g Alo e W woke ealy a, o a es do o loe, 3 wh Te effe o pof oweve, deped o e

ue of e uly fuo der e aupo made,

olls from 3 d e f H • B • L a,



-7-

(5)

,f)

�wer L • w B the tota abor orce o he m h ee no

,

m�ton, r? od be,

0 • (L) ( L) L,

s thereore the chae n pro mpy,

;

e ght-hd te ha a ne nepeaon. e conde an

ree the abor orce h the poon o W and B orke

tt the the eave the maga ate o btto o

t or th baanced creae mpy d (/L) +d B (B/L); th

the ee or ddtona p to cmenae or a baancd

ee e Th erm may o coe be tve o neatv.

Hever, pbe ypohe hch e a manan heeate

tht epoyertacton depend oy n e ao o B o orke.

I tht ae,

(7)

te a empoye nhe n n e by her dcmnory

ehvor. The ene ec a an om B o W oke.

et o eax he amn hat y ncn ae denca

og rm. e cnne o ame a o each m, e y eped ony on h a o B ke, b me m may be me

rory than oher, n he ene ha he mana ae o

btton o pro or B oke be me natve at any ven

rto, B/W. Eaon and 7 hd or each m, a eat each



-8

thploy boh ype o orker They a be regarded a a par o

euo W ad B o yed,

Si�e .

> O, f there are both B a nd W workers, t must be that w

> w B'

beoe We oerve rm h dere rao o o The

fi t hat ds play the most dscr mnato at t he marg n . e . , the

ghe vaue o d

B

have he hhe rao o W o Th an oerva

o o a he exee a erm revea a dpeon

Wropoo he aor ore and hee rao meare he

vg deree o drmnao Th a paa deree o ereao

ear; he B orker end o e ond n he e drmnaory

he W orker n he more drmnaoy one

Hoever rher anay ead o mpaon hh mh rae

oe ra eon S peay, eaon 2) hod h

• ee aordn o he mode, hher or more

dra rm B hen e ae dmnhn mana po

duvy o abor oo ha he e dmnaory he m he

ager e Th aod oon ene drmnaon

o o he ereprener and a e a ax on hm ne h

h dead or aor o he more o omponen ene rer

h ae

e ML o oner he ame rom rm o m oo ha

duo no oner een The prevo ron aemen

bu he dee o drmnaon o oner hod exay ehe



9 -

ther genera thrt t probaby correct Ecency

ae not apt to be great and the an redtrbton t

� e t be o B orker to W orker:

It ha been een that copetton tend to redce the deree o

naton n the ket n the ene that the nehted averae

cnaton coecent o the derent xceed the aerae

ghted n proporton to the nmber o orker

et ch ay o ay not be eprcay reanabe appear tongy and e key hen one phe the anay n the n rn

ae a that capta hch ha been htherto hed xed

jted optay to the e o the abr rce hen capta

o t th ore prtabe enterpre hch n th context are the

rnatory n the on rn otpt thereore mpy

tona to abor (amn the prodctn nctn day cntant

t to pta and abr) . The argna prdct o abr then

tt a ret the copettve eect t tded ame an

ggeated or Ony the eat dcrmnatry vve ndeed

the ere any rm hch dd not dcrmnate at a thee d

th o one to rvve the compettve tre Snce n act

aca dcrmnaton ha rvved r a n tme e mt ame

hat the ode jt preented t have e tatn t hch e

etrn n ecton beo

W have deat extenvey th the amptn dcrmnatn by

poye Bt a e oberved earer dcrnatn by coorker



t

1-

most statfoad extenson of t pedn

S ppose now tee ae

ds o ors say oemen and floo wokes t s te foemen

rng t Ws and dsle wokn wt s As befo, we1 r

tt t s o dsles a oveed by e ato of W to B

r orrs Ea foeman ten ooses amon alenave emloymen

rutes on t bass of bo waes and e / B ato Assme tato

orn ave te sam tlty fnon

equrm n ts model s a tfle noodox)! _ nsead of an

qr ag or oem, ee s an elb elaon beween

r s aes and WB atos n fms vey fm ms le on s

ue, nd te eulbm ve wll be on of e foemens

drene urvs between waes and /B.

{t F b te nmbe of foeen, and w e wae Ten te fm

s xed WW an W B fo t floo wokes and a fxed elaon,

r W B s e oal floo foe Te £ s son ofs

re dened by,

(9

r t s assmed as befoe, a and B floo wokes ae efet

usttutes.

ssme no ta fms ave no dsmnaoy ases Tey se

ly to maxme ofs ey wll sll no e B wokes at eal

gs t W sne an nease n W deases e waes and tefoe e



-1

hil an incease in B deeases e cos of F. ene a

i oh mo han his mainal pod hile a B oke is h l acl a in he ase of ploe disciminaion. F he

n h pemi ove o deficis fom mainal podc depend

y h ai f W o B ene he pevios analsis applies ih }

uial mdificaions W okes ae paid moe han hei mainal podcn

o lss f all fis ind p ih he sae levels of W and B

n h sls a eniel paallel o hose fo eploe disnaon

ucions emains effiien and he enie iniden o he foeen's

cinaion all neaivl on he B oke and poivel o an eal

n on h W s.

in he ca of eploe disciminaion he exen of he ae

nc bn B and okes depends n h een of diciminaion.

ecis fomla is of some inees eall ha b F is a

unin of h aio W/. B F ill mean he deivaive of F

h p o his aio (his is neaive) . Then F/F is he

ional ae of chane of he deanded ae ae (aon he

quilii indiffeene ve beeen foeens aes and W popoionl

l foe) and heefoe i a meae of disiminao ases.

oal pamens o foeen S oa paens o floo okes

hn h folloin ha been shon in o [97 Tehnial Noe B].

- )



2

h lfhnd sid is h ake diffenil d o dis

no ss of fon elaive o e levl in he absenc

inion

h is n insin spc of his fola. ivn he deee of

inion as esed b F/ F he obseved ae diffeenial

ds on h io SF/S. Tha is e oe impoan he sae of

n in op of e fim elaive o floo laboes

h ae diffeenial.

lngag of pecedin analsis has assmed h i is he

n o oh speiso eploees o disciminae accodin o

he oposiion of e floo okes. B e analsis iself is co

ll bsac. a b illminain o evese e oles. S ppose

h dcion okes hav son disciino feelins bo hei

upvisosCainl ida ha hi okes sonl esen

ing ossd b blck spevisos o male okes b feale foemen

fldies? foepesons? ) is a coon one. Ten i in ) e

undsnd b W nd B ose kinds of speviso okes b e oal

nb of sch okes and b F e floo okes ave an excellen

plnion of disciminaion aains B speviso okes fo SF

hn old b Ve lae indeed copaed i S

on a possibl diffe in ei ases fo disciinaion. ne

h sppos ha is ill lead o a edcion in make ae diffeenils

nlgos o h siaion i eplo disciminaion. a flle

lsis of is cse eains o be done.



1·

-1 -

niui of demand fions. B is aen applies ol

to ivil an fions.S

ine eah idividal is sall on e f scale nie ake even e laes disoii in an individal

a fuin iplies a neliable disoii e ke deand

ui obsevaions i ses appoxiae oini in · r man funions in a ipl onvexi of idiffeene sfaes

k iula e exisene of eneal opeiive eilibi ais

nffe be peise e exisene of a appoxiae eilibi

Of ul nd emand all akes a be deonsaed. (This line of

n as sesed iniiall b Faell 1959] d sbseel

lpe b Ba ] oebe ], Aa 19], ad Sa

n exposiin see Ao and a 1971, Cape 7]. is h e ake dead fnion if i is effeivel

ino an be eived b addin p a e se of idividal dead

ins eah deived fo a ovexified indiffeee ap obaied

1;

oiial b fillin i all e oles i e indiffeee sfaes.

he poin of vie of pies ad oal ake aiies e el

fd indiffeene ap pedis as ell as e oiial does and

efoe e i beeped o asse a oe old as if

iniffeene sfaes ee ovex o i soe fla sfaes. B

i a lss f infoaio fo e disibion of ods aon

individals is ie diffee fo a i old be if all idividals

nve idiffeee sfaes. Ts i o esideial loaio

le he ake oals (o a peopleos ae spe in ea

l and he es i e o plaes ae ell pedied b he ovex



-15-

io Bt rcogizing h ndling nonconvxii l

us ric h half h l ill b in on plac all h im

l i h oh inad of ach individal pnding half hi

i lc nd hlf i h oh.

giv bif diagraaic illraion. S ppo v

iil h h am indiffnc map a givn b Fig 1, and

iiil ndon pnd b A. On iniial acion

cio b of oking ih convx indiffnc map i

, ha h i no ad inc all individal a alik in

vr conomic rpc h hold ind p ali, hih in hi ca

ch ih hi own iniial bndl. B hi i cal fal. n

ch qilibrim can b obaind a follo convxif ach

irnc crv b filling in h hol ih a aigh lin gmn

g o h crv a boh nd a for xampl h gmn B on

cuv No ha if pnd fo h momn h h0cvxifi p i h indiffnc map fo ach individal hn

ch iivial ind p on h convxif id cv Sinc hi0

crv i l a h poin A h pic aio i dmind b h lop

B No o h individal ho ha h oiginal indiffnc

cu 0 A h pic hill maimiz ili a o diffn

i B and b no a an poin in bn f fo xapl A

alfa bn B ad h ma qilibim i alizd b

vig h h inividal a B and half a f A i ohid

o h a fom B o h ma ilibim i alizd b having o

hir of h individal b h bndl and nhid h bndl B



16-

Nte ha ach individual is at a ont of maxmum utility for hm

sjet to his udgt constraint so that ths is truy a coettve

iriu and therfor fficent (The earier reference to

"appoxte quilirium is rvant whn thr ar not enouh nvuas

to pt thm in th rht roortns etwen B an c Thus f s .71

o h ay from B to C ther are only 5 nvduals n the ecnmy,

hr should 51/2 indvduals at C an 14-1/2 at B Thus, at C or

the discrancy eween suly an eman cannot e reuce eow half

idividual hs is relavly a mnor screancy eteen suly

nd dmand)

hus non-convxty mes he snce of snc nches for

conomic aents in a sense of the wr whch ake to e cose to hat

d in cology On oss agents ienca in ther ecnomc ata,

gd in divrs consumton atterns or other cnmc acvtis. ny

ivn agn may inffernt eeen several of hes iches utiirium rquirs thir costence. Ths argument unerles am

ihs dscusson of secalzaton as ose o caro's whch was

ad on difrences in the ro ucvtes of ndvuas or naons t

ha n mad xct n an morant ut neece aer of uhakker

[ J.

t m now ly ths astract concs to raca iscrmnaton.

tae p a modl due o Becker [1959 Char 4] an n a fferent form

t Wch [1967] and not anaye aove Nw we ocae he scrmnatory

ss in the W workers ho are erfec sustues for he B workers.



-17

To atts as smle as ssle, assume thee s nly n kin f

abor,Thn analgus t the assumtn mae aut cmlementay fs

labor nw assume that wkes have an nffeence ma etween

s nd th tn s that at qulum, thee s a elatn

(11)

W dcass as /L nceases fm t 1 As at f ft

iatin th fm wll cetanly ek that cmntn f an B

hich ill inz the cst f hng whateve ttal nume f wkes,

it s h. Ths cst s

(2)

ut it s asy t se that a fm wll always acheve mnm cst

ih ith an all- an all-B la fce. Th tw mht e equally

ha ut cetanly any cmnatn th an B th stve will csty than at least ne eteme cas an ssly me csty than

th T se ths, cnse tw cases :

ecall that /L • 1 means an all la fce.>

hn f any , < L, w/L) > wl) = w B an theefe w/L) +

> B(B) • w 8 L; hence, an all-B la fce, wth cst w B L, s

hea than the mtue'

all- la fce as a cst w

l)L an then W(l) • w B L s the all la fce s at an ate n less cstly;

i W(l) w B the tw eteme cases ae equally chea

() wl) < w B Then f L, w/L) + > wl) 8 B >

(l) (B) l) L the all- la fc s hae than any the

la fce



-18-

i W(l) B every firm will find it cheaest to select

ll lo orc and if w {l) w B every i will minimie costb i n llW laor force But euilirium reuires full lyment h ys orkers The euilirium then reuires w {l) w 8

n then n i will hire h W and B wrkers We find then, that

qilii every firm is sereated, ut then he nly served wae

W okes is r thse in allW firms ie, w {l) , which is eual to

B

heeor discriminain y W wrkers will nt result in market

dierentials ut insead does result in sereation

In tehnicl tems, the fnctin C {W, B) is nt a cnvex functin,

iilly, the isocost curves in WB sace are n cncave to the riin

nxity imlies a tendency t the middle, t comrmise; ut here we

h shin to exremes. We also hve the characteristic imlication

onvexity a disersin of fims with asically idenical market

niies int discrete niches.

o in oin ack over the analyses f section 2, it can e seved

h he se just discussed, f discrminatory tastes y a erfect

ssitt ru of wrkers, is srikinly similar t ha f discriminaty

ss y orkers of a cmlemenary tye, the foremen f our examle.

h detiled analysis of he nnconvexiies in his case has not

yt en mde, it is clear that he rfi fncin defined y (9) is nt nrl concve fnctin aher, the srface defined y rfits as

nction o W and B has hles scaered thruh it ence, it is at

ls ossile that for certain values f wW and 8 and sme euilirium



-19

laton FL hr ar svral dsnc ons of maxmum rofs.

Eqlbr on h hr laor marks (W, B, and ) may achvd

by dffrnt amouns of hs vn houh ach f has h sam

podton unon and ach facs h sam as for W and B and h

se rlaton n and W/ . Thus, hr ll a aral

sgrgton y fs

h rlaon 1) sad arlr sll holds for ach frm, so h

prvo onclusons rman vald.

an no rcor h hory of mloyr dscrmaon. Th

tlty fnton U B, W) , dnds, has n assumd, only on h

rato BW Bu s hon n h ndx ha such a uly funcon

2nnot oslhav convx ndffrnc surfacs vryhr. Thrfor

t ol and n fac lkly ha n h shor run ulrum ll

rqr h coxsnc of frms of dffrn ss h dffrn /B

rato vn f all fs hav sam uly fucon. Thus a laspartal sraon s a lkly oucom of h uyaxmaon

thory. ll h fs ll hv o hav h sam uly, so ha h

larr rms ll hos h h larr rooros of Wrks

nc uly crass h and h W/ B.

In h lo ru, ndd, ca s ha h consan rurns

to cal, r mus rfc srao ad aly of as.

h nonconvxy ha arss hn oly raos ar s of morancn h hory of olluon also. or h characc suaohr s ha h ollu s facd h com ar or ar n hchh rooron of olluans s vn o h.



fr•0

-2

thr s not rfct sraton, . , thr s at ast

n i hirng oth B and worrs. or that frm, d

B

> and

n ML s onstant n th on run, t foows from th rcdn

in h B workrs w n frms wth th st d B and a

n fis wth th (agracay) smast < Thn a

h th m d B and sam nd thrfor a hav th am /B

qrum vaus of w and w B w L - < and L - d B

ty, whr ML s th on-run marna oduct of aor,

ntn But thn any f whch ncrass ts / rato shty

n k oitv rofts; y ncrasng ts sca, t can mak

indfnity r rofts wth ony a shty atd /B rato

I wd thrfo hav a hhr utty, so w hav a contadcton

h xtn of m wth at ast on ntratd frm

Hn frms r sratd. n an a-B m d 8 • for an

in n B dos not chan th / B rato and thfo avs utty nhngd Smay, n an a fm, • t foows that, as

in th s of dscmnaton y susttuts, th on run u

i n of rfct sgaton and qua was

h rsondng anayss for dscrmnton y commntay

ys has nt n wokd out t can concturd, thouh, that

grgton u ossy comtton amon fomn wth van

dimntry tasts w graty wakn wa dffntas



�:;�

21

3 osts o djustment

1 tilitymaximizaton theories then rove a coherent an y no

mean unrasonal account of the effect o iscrnatory tastes on

the market in th short run Yet they ecom unsatisactory in the

on un I roos as a ossile exlanation that long run ajustment

sss do not wor as erectly as they are usually assume to

Wen there are signiicant nonconvexities, the ajustment rocesses

c&lled or must ery rai inee; marginal ajustments are unishe,

not rewarded. In th cas o dscrimination y sustitut workers, the

f' wold ha to e willing to re its entire all laor orce an

replae it y an allB or orce or vce ersa n resonse to a very

mall change in wages t is not unreasonale to asse that there are

ot not orinarily taken account o, whch will restran the

from in quite so re n its ajustment ehavor

o the idea that ajustment is costly is one that has aear in

everal dierse areas of economcs The costs o growth enter exlictly

in ome ersions of the ynamic theory of the (Penose [19 59];

Marris [1964]) . That is, the growth of the irm moses a cost which

dens on the rate of growth an whch is atoal to the urchase

o caital goos

The same rincile, that catal costs o an unconventonal kn

play an imortant role n economc ehavior an ecsons, has een

alid to th stuy of laor tuover, a rolem more closely connecte

wth outs Oeratons researchers, in tryng to raw u lans for the



:1

rn rnnl hv nrtd n thr ods d ot / (

rn n ndvdul ts t s lso hld t tr a cost» ! t rng ll hs cost ar rty n adntrton[i, trnng Evn n th cs o rrs h hv rdy n

l trnd n th n or to don thr nd r

n th y th artculr hs aroach t has n

\ud o hs ortnt gnral conoc lcatons t is

should not djust thr lar orc to cyccal shfts nnd snc thy y ncur oth hrng nd rng cots thy do

·

t ht r vodd th orr rtand durng sc rods

r r r ng hld n oynt vn though thy contrut ltt

t utut t avod th csts o rhrng the n th xctd utur

I d nt no ysl hthr th xnaton s n ct dut

ut rl not that t s srously consdrd

I uggt tht a slr consdrton xans hy th djustnts

ch uld out rc g drnts do not occur or t last

r grtl rtrdd W hv ony t ss that th oyr a

n nvtnt lt us cll t prsonn nvstnt vry t orr

hrd H aks ths nvstnt th th xcton o ang a

ttv rturn on t f h hs has no dscrnatry ngs

t g rat n u qr ll u th argna roduct ofr l th rturn on th rsonn nvstnt Lt us consdr th

lst o th aov odls that o dscrnton y lo loys

h r rct susttuts I th rs strts th an a-W laor



3r·,·: ll nd ral t fr that forc, n ch ts

nl aal has alrady n snk, and hr an allB forc n

:'

hh nvsmn has to mad smly cas B wags ar now

slghtly l han W wags Of cors, f th wag dffrnc s larg

gh d ay to mak h shft

sly, a saton lk ths, whr thr ar costs to chang,

hy atrs a good dal A flly dynamc analyss aars o vry

l t som nsght can otand y stdy of a vry scal

I hr rsn nly th rslts; th argnt wll fond n

1 Thncal Not E S os ntally thr ar no B workr

h la frc Thn som ntr; at th sam tm, thr s an

dnal ntry of W workrs, and som nw lrm mrgs ndr

h nd assmtons w hav n makng, a chan, f t occrs

ll an xtrem chang, t thr ar now thr knds of

, crnr maxma Th tcal frm may rman sgrgatd

hgh ossly addng mor W workrs, t may swtch ntrly to a

g gad B sta, r t may fnd t st to k ts rsnt W workrs

l addn g B workrs In th last cas, of cors, t wll hav to

rs th wags of th W orkrs to comnsat for thr flngs of

dlk; t may stll fnd t roftal to do s cas rlacng th

s W workrs y B workrs ans wastn a rsonnl nvsnt

I stck closly to th modl wth all of ts artcal condtons,

that nly th allW fms ar asorng th addtonal sly of

rkrs, so that thr st so of thos n th n lrm

an On th othr hand thr mst som fms that ar a-B



r ·�j,1'"-'

;J

o ntgtd i who nw w in d t

th nw w t cn concld in ith c, howv,h th wl lwy n wg difnc twn nd W w

th d F th th will ggtd W i th

h ining f will ggtd intgtd dnd on th g diciintoy fling y W gint mixing with

l :

hv nt wod oµt th conding nalysi fo th c wh

h vl ty of wo with diffnt dg of diciminto

ing gint cil mixtus in th omlntay ys Nvthl,

n i ily that imila conditions will vil.

h nlization tht may hzdd on th ai of th discssio

th f cn tatd s ollows w tt fom osition

B nt n ntilly allW wold th diciintoy fling lo nd y emloys, oth of th sm nd of comlntay

t will ld a diffnc in wa Th foc of comtition nd

th tndncy to ofitximization ot to mitigt ths diffnc

wv th sic fact of sonnl invstmnt vnt ths

cntcting tncis om woki with full foc In th nd, w

in with wag diffncs could with tndncis to sggation

cding fiv gh hv n qotd, with mino lttions,

9 0]



,"

2

4 If Irmaion

"; "

laive ieeion of employer discrinaon.b�I houg of as reflecig no ases bu percepon of J i ·: h if emplyers ave preconceived ideas ha B wokes+I e uiviy ha W wokers hey may be expeced o e

g hir hem ly a lowe wages. On ms examine i deail

h di undr ich is men is possible o mainai a

h diis ude whch e effecs of ese peconcepions aer, ·he hos discriiaio i sric ses f ases

irs ll he ployr ms be ble disinuis W wokes

f ers Moe prcisely he cos of makin he disincion' )hu b easably low employer mih deve frm his eading

he ii h mply wih n nsolved Oedipus complex will beJ 1 h s a fahrsubsi; if only way of deeminin

h sen o an ueslved edips complex is psycoanalysis of

�as e sul aes may well decide a i is no oh

W hi se is as a bass fo iin. S kn color and sex ae orcs f iomaon. Teefoe pedces (in e lieral sense

,'of -judgmens dmens de n advance of e vidence) abou sc � ieia ca be easily mplemened Scool diploas ndobedly play

essive ole n employe decsions fo c e same easo.Scond i ms e a he employe ms incr soe cos before e

deeie he employee's e poduciviy i cold be deeiedle hee would be no eason us surroae infomion

si lss valid ev uder e ms fvoable condiions.



iF;4;. tror tat t myr mut r t oy rt and

6-

�t:l� �t

i i

n onn ntmnt ot dd n t t ton

n dtn t orr roduty ronn

ve t or nud rod o trnng ony tr

1 t to rt n t orr rodutty; or ndd

·1 my ny rod o oaton ong noug or ab dtnton

rdtty In t abn o ronn ntmnt ot atr a,

t or oud my r ryon o ad and r to

ud or ay tm ordng to rodutty.

rd t mut b umd tat t moyr a om d or at ny

t rnton o t dtrbuton o rodutty tn a o

t tgor o orr

mt d to rng ou t maton o t aumtn

t t oong S uo tr ar to nd o job om i

m y t a otr ay und and d A orr ar uad¢l ro und jo and t no to a moyr Ony om

rr or ar quafd to od job oyr nd

no ronn ntmnt n rng und orr but mut ma

u n ntmnt or d orr moyr anno no o any

gv rr tr or not uad; or, do b tat

rty tat a random W orr ua

Pand tat a

dom orr uad An moyr ntuay no

tr or not orr rd or a d oton n at uad

t t noaton not aab to otr moyr H tu an

unt n n t uad orr r



t -27-

h e h ecessa en pe woke on e pesoel nvesen

or jos f a W woke s ed e w poal e qu hs poducv s S e aal podcv of

ks he eploe s pa a wae wW so a e e

h ploe s S w On e oe and f e woke ed

us o e unalfed e ploe eceves non. ence e

c e o a W oke hed s S - w ) f e ploe

skual s s e eal o Slal

heefoe

(14)

q • B \ • Ts fo an eason p B < w s a weed

vag

B

ad

S

and eefoe les ewee e; snce fo (1)

s have B < S ( ode a e eploe ecop s pesonnel

vse) follows a wW w B e e eec of e dffeeal

jue as o e poal of en alfed s efleced a wae

eeal

If ee ae pce des wc peven w B fo falln c

l W e se oces a e efleced n a esal o e B wokes

a al fo sklled os.

Oce e sf e explanaon of dscnao eavo fo

ae (o a a ae nanalzed) ases o eles we ae led o

eek o explan ese eefs. e possle explaaon ns n es of



28

hlgil equiliri hich Festigers ther

issce [9 7 is e f the mst develed he rgetk f!f ; le d ctis shuld cme t sme srt equiliri;

lr diiuls t discrimitry mr they ill

qure r devel elies hih ustiy suh tis. Hecet .it ehvir d el i dieretil ilities ill d

e t equlirium deed the very fct tt tere re str

el elie hih re i cflit ith disrimity ehvir ill

thi ther me the lyer eve mre willig t cet \ rilitie hih ill ul rrite ustificti

i ut

ill e c ls see eltis i hich d 8 differ

rlt ve tugh the itsi ilities f d B wrers re

del S uch exlti reuires sme furter ssumtis.

eill hether r t wrer is qulified is w te t e

h esul decisi y im rter th sme tye f itrisic

t Mre secificlly wrer emes qulified y mi sme

e veset i himself crde it te revius ssumtis

h iestmet must t e sevle y the emyer Hece the

eet re t the usul tyes f educti r exeriece whih

r ele ut mre sutle tyes f ersl derivti d defermet

rtiiti which led t the hits f ti d ug tht vr

d ermce i silled s stediess uctulity ressiveess

itive



·

-

s h rtrs f th prbl; it is crtainly ssibl tht

ri b unstbl a rsult hich strngly suggsts thugh

it rv that thr r quilibria thr than th sytric

»riiry n

iivy cnsidr pssibl squnc f nts, in which

iy slightly xcds fr s rsn Thn w slightly

ds thrfr fr () tnds t is rlati t p

hrr rinfrcing th riginal disquilibiu This vrbal argunts rily nt cnclusiv nr ry cnvincing t is ncssary t

iy th dynic dl r cisly d thn calculat th stability

itis W supps tht fr giv nd shrt-un quilibi

r slf ut s quicly s t b instantanus Th asic dynaics

h r rshllian; tht is dusts itslf r ti t th sir

v S (vw and siilrly with p n sybls,

d siilar qutin f p This givs pair f diffrntial quatins

study thir stability in th nighbh f th nn-disciintry

quiliriu hil th algba inl is lntary nugh th ss

y f aing th rsult intuitily bvius nc w siply

rrduc th stability cnditin h rfrring th ar fr pf

rrw 7 Tnicl Nt

t b th c� n valu f w and w at th nn-discriinatry

iibri th cn valu f nd p Thn w - is th



-1

l u d v B

. L E e the lastit y f S( v) wth re pect

to , putd t t he sy mmetri eqlirim vau f v. F 1),

M • r/ at the setr eulrm he exe f mana S ,

ut e as fr silled rers he he nit fr al y

s ut t that

ight e expeed he greaer he elaty f the sppy

hedul r ualfed lar the e ley he sysem e nsta

ilrly the grater the diffeene eteen mrna prd ad age

r silld rrs th mr lly s isaty hs dfferene uld

e r i there ere ernel etet ss fr kile rkers

th th system uld ertanly stale Fnay ad less

tutl the larger th ag ga etee the type f lar the

il is istailtyI lie thee reslt are ly the ares fagmet f hat e

ud ith etter and mre deae systes hh hee a iner-

ti te realy and perep f t. One ne tl

r reisly h nidal emyers aure knede hh l

i thir inial estmates f dtr tn a ffen e een

grus d i turn he effe f hee perepn n he ake an

thrr ay nene mfy the ales



Rere

K J 97 Ri iriti i t br

�

rrti t i Cii 6-R •

K J 97 Gr titiv Ai

A, RJ 96 Eit Eqiiri t ti rr

i 2

r R*

r G 959 Eis iriti Cig

Uiverit ig re

Irite vert r Ierite Re? I

i ) On Uersti Pvrty. Yr

i B Cter 4

grt Y 122 y t Me d We r Eq Wr

Ei J 31: 4147

r M. J 19 59 e Cnvxy Aspti i te er Cpetitive

rets � f Piti 7: 377-379

iger 197 !_e Cgitive isse vst I :R Pter

r 19 iiti peiti Kk



l � '

--

R 964 h Ecmic Thery 'Maagerial' apitalism

g UK ambide Uivsity Press

s E 959 Th Thery the rwth f the Firm Oxrd Oxrd

Uivsity ess

thg J *

t . *

ttt 9 udamta Ncvxity i Exteral Disecmes

Wlch 6 abr arket Dscrimiat: A terpretat f

Icm Diereces i the ural uth ra Pitca Ecmy

5 : -.



-'" '� 'ANDX

Nocovxy of dff p Dpd

W suppos tt poy dcmo s dmd by uty

uo U( B ) mupyg bo B d by t m

o ost vs utlty ucd. o sum s

rsg uco of poft t b o tt t

r p fd by U cot v cvx dffc ufcs;

pclly covx cmbo of t dff po

ry t t good

oos y pt ( B , W ) . T cos < 0 { cos s0 0 0

) B1 1 o t

(1)

ro ssp md, (1) cotu d f B1 d 1

rud t sm proo. Hc B1 d 1 c b c

rrry sm dffc mp dfd by U vy covx dffc

surfcs t v of o po mt b d

s ( B ) T 0 0 0

U ( B ) = , B , ) ,0 0 0

r • /21

/20

, B' = /21

/2B0

, ' /21

/20

But t, sc,

v,

( 2B I ' 2 I ) u ( I ' B'

U ( B , 2') , ) ,0 0 0



-2-

fih,or y defntion

�ti\·\' .

.• : >

U ( n ' Bl + B W1 + W ) ( , B W ) .0 0 0 0 0

ut B nd w1 can be cosen as small as desired Let tem approa

O y continuty

( n ' , B W ) • ( m B , W ) ,0 0

whch s a contaictio n to te assumption tat is inreasing in

n sne n <

•

0

the theory of discrimination

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