DISCRIMINATION IN AN EQUILIBRIUM SEARCH MODEL

I construct an equilibrium search model where some employers have a di staste for hiring minority workers and show that this bias results in economic discrimination against minority workers. Although only unprej udiced firms hire minority workers, minority workers receive lower wag es than workers not facing discrimination whenever any employers in th e market have a distaste for minority workers. One implication of the model is that gender or racial wage differentials understate the utili ty loss from discrimination. In addition, the wages of minority worker s increase when their proportion increases in the labor market.