Discrimination and Population Composition in the Long Run

Abstract

The effects of a changing population composition on wages in the context of wage discrimination have been analyzed when labor supplies and discrimination preferences are fixed. This paper introduces variable supplies, with labor supply varying at the extensive margin and discriminatory preferences varying with population composition. We find that wages of the discriminated and the non-discriminated group can change in the same direction, depending on the aggregate market, relative market, and distributional effects. Variable preferences may also change the direction of the effect on the wage ratio.

Keywords: population composition, employer discrimination, equilibrium wages

JEL Classification: J21, J71