Economics Sample Homework Paper on Approaches to the Economics of Discrimination

Approaches to the Economics of Discrimination

Approaches to the Economics of Discrimination

The objective of this paper is to see the level of involvement of the “conventional” theory in explaining the problem of discrimination, with the main focus on wage discrimination. There are other types of economic discrimination, which may include persons who are systematically excluded from one class of job.

The “Discrimination-Preference Trade” Model

Refers to the most well developed competitive equilibrium model and only differs from the conventional model in the sense that some individuals from one group prefer working with others in the same group and are willing to sacrifice income for these preferences.

Market Failure

There are different forms of market failure that can be associated with discrimination, including monopolies and oligopolies, disequilibrium in the labor market, minimum wage legislation, efficiency of the wage model, disequilibrium and political intervention in the housing and transportation markets.

Considering the economic characteristics, those likely to be imperative in explaining group differences in income include differences in turnover rates, differences in information about jobs and differences in education.

Implications of Group Differences

In case firms are to pay individuals the same wage, despite the “group” to which they belong, they would be employing discrimination.

If hiring and wage discrimination are forbidden, the national yield will be lesser in the short run because the provision of labor may not be as effective as before.

In case firms are prohibited from differentiating between individuals in terms of “group,” they may rely on other indices to predict performance.

Concluding Comments

The models shed some light on the differential wages received by members of different groups but the elimination of differential treatment needs quantitative guidelines, which may be unnecessary in the long run. In some models, the elimination of discrimination led to an increase in national output, in other to a decrease in the short-run but an overall increase in the end.