EC306 Lecture Notes - Lecture 11: Xm Satellite Radio, Jumpstart Our Business Startups Act, Occupational Segregation
Document Summary
Chapter 12 discrimination and male-female earnings differentials. Suppose there are two types of workers in the labor market: red and yellow workers. Consider a competitive firm that is deciding how much of these inputs to hire. We assume that red and yellow workers are perfect substitutes in production, so that the production function can be written as: q = f(er + ey) The marginal product of labour is the same regardless of whether the firm hires a red or a yellow worker. If the market-determined yellow wage is less than the red wage, a firm that does not discriminate will hire only yellow workers. It hires red workers up to the point where the yellow wage equals the value of marginal product of labour, Because red and yellow owrkers are equally productive, any differences that arise in the economic status of the two groups cannot be attributed to skill differentials, but must arise from the discriminatory behaviour of market participants.
