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Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University CAFO Working Papers, Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University

No 2006:10:
Discrimination: Believe it and You'll See It

Ali M. Ahmed ()

Abstract: This paper presents a model where workers’beliefs and expectations about discrimination are significant. Identical firms announce vacancies and starting wages and workers apply to the firm. Workers are of two types, b and g, but identical in productivity. Firms do not prefer a particular type of worker over another. There is however a common belief among all workers that type b workers are discriminated against. This causes type b workers to avoid applying for jobs that offer wages perceived to be too high, since such workers believe that they don’t stand a chance against type g workers. In equilibrium some firms announce a job and high wages thereby attracting only type g workers, while others announce with low wages thereby attracting only type b workers.

Keywords: Discrimination; Workers’ beliefs; Directed search; (follow links to similar papers)

JEL-Codes: J60; J70; (follow links to similar papers)

24 pages, September 25, 2006

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