Does Equal Pay Legislation Reduce Labour Market Inequality?

26 Pages Posted: 26 Nov 2006

See all articles by Leo Kaas

Leo Kaas

Goethe University Frankfurt; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 2006

Abstract

This paper considers a labour market model of monopsonistic competition with taste-based discrimination against minority workers to study the effect of equal pay legislation on labour market inequality. When the taste for discrimination is small or competition is weak, the policy removes job segregation and the wage gap completely. However, with a bigger taste for discrimination or stronger competition, equal pay legislation leads to more job segregation, and sometimes minority workers end up earning less than before. Profits of discriminating firms may increase, and discrimination can persist in the long run although it would have disappeared without the policy.

Keywords: discrimination, monopsonistic competition, equal pay legislation

JEL Classification: D43, J71, J78

Suggested Citation

Kaas, Leo, Does Equal Pay Legislation Reduce Labour Market Inequality? (November 2006). IZA Discussion Paper No. 2421, Available at SSRN: https://ssrn.com/abstract=947072 or http://dx.doi.org/10.2139/ssrn.947072

Leo Kaas (Contact Author)

Goethe University Frankfurt ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt, Hesse 60629
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
97
Abstract Views
1,103
Rank
489,057
PlumX Metrics