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Department of Economics, Copenhagen Business School Working Paper Series, Department of Economics, Copenhagen Business School

No 05-2012:
Labour Market Performance Effects of Discrimination and Loss of Skill

Birthe Larsen () and Gisela Waisman

Abstract: We examine the impact of discrimination on labour market performance when workers are subject to a risk of losing skills during the experience of unemployment. Within a search and matching model, we show that all natives and immigrants are affected by discrimination. Discrimination in one sector has positive spillovers, inducing employment increases in the other sector.

Discrimination may induce immigrants to train more or less than natives, depending on the sector where it is present.

Welfare tends to be most negatively affected by discrimination among high- productivity workers.

Keywords: discrimination; unemployment; search and matching; wages; (follow links to similar papers)

JEL-Codes: J15; J31; J61; J64; J71; (follow links to similar papers)

35 pages, October 15, 2012

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