1. Employer Taste for Discrimination
Nondiscriminatory firms will hire at the same wage, but discriminatory firms act as if MRP is lower than it is and will only hire at a lower wage. With supply S2, there will be a wage gap in equilibrium.
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2. An Increase in Nondiscriminatory Firms
More firms with no taste for discrimination is like a shift out in the demand for minorities and increases the relative wage.
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3. A Decline in the Taste for Discrimination
A decline in firms’ taste for discrimination is like a rotation out in the demand for minorities and increases the relative wage.
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4. Occupational Crowding
If a minority group is denied entry to a given sector, the sector they are allowed in can become crowded, leading to a wage gap between sectors, and hence between groups.
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5. Using a Signal for Screening
In this example, it would make sense to use a score on the test as a screen for hiring, even though some mistakes would be made. The further apart the distributions the better the screen. If they were so noisy that they were very close, it could be worth investing in a new signal.
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6. Statistical Discrimination – Group as Screen
If there is a difference on average between groups, group identity might be used as a screening device. The closer the group distributions, the more costly statistical discrimination will be.
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7. Earnings Distributions
Earnings distributions have a long right tail.
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8. Constructing a Lorenz Curve
Households are lined up by income quintiles. Here the lowest income quintile earns just .038 of total income. The top quintile earns = .468 of total income. Equality would imply a straight line.
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9. Inequality Increased 1980 t0 1992
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10. Supply-Side Sources of Widening Inequality
For supply-side sources to explain the observed trends, supply of higher skilled workers would have to decrease and of lower-skilled workers would have to increase.
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