Some Models of Racial Discrimination in the Labor Market

by Kenneth Arrow


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Part of a RAND study on the measurement of racial discrimination in the economic sphere. Although neoclassical theory can offer a coherent and plausible explanation of the impact of racial discrimination and accounts in a gross way for the known facts, some problems remain. This Memorandum describes a simple model by which an employer can purchase black labor at a fixed price; for this labor he must choose some point on an indifference curve between wages and the proportion of whites in the firm. The implications — no wage differentials on the one hand and segregation on the other — are respectively contrary to and harmonious with observation. Thus, there is a failure of convexity — extreme alternatives are preferred to compromises. Technical analysis of the model is presented in notes following the text.

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