Labor Migration and Labor Market Discrimination

• existing allocation of workers and firms may not be efficient?

  migration
• Actual expenditures incurred in transporting the worker and his

  family?

  direct migration cost
• Pain and suffering” that inevitably occurs when one moves away from

  family, friends, and social networks?

  psychic cost
• An improvement in the economic opportunities available in the destination _ the net gains to migration and raises the likelihood that the worker moves?

  increases
• An improvement in the economic opportunities at the current region of residence _ the net gain to migration and lowers the probability that the worker moves?

  decreases
• An increase in migration costs lowers the net gains to migration and reduces likelihood of

  a move?

  true
• Differences in skills across cohorts are captured by _ (which can bias the effects of migration status on earnings)?

  cohort effects
• Describes how workers sort themselves among employment opportunities: Which workers in the source country find it more worthwhile to migrate into the destination country– the low-skilled or the high-skilled?

  roy model of labor migration
• roy model of labor migration Assume that: (1) earnings depend only on skills and (2) skills are transferable across countries?

  true
• Workers with fewer than 𝑆𝑃 efficiency units earn more if they stay in the

  source country?

  positive selection
• in positive selection Workers with more than 𝑆𝑃 efficiency units earn more in the US. (they migrate to the US)?

  true
• Workers with fewer than 𝑆𝑁 efficiency units earn more in the US, and will want to move to the US?

  negative selection
• in negative selection Workers with more than 𝑆𝑁 efficiency

  units earn more in the source country and will not emigrate?

  true
• Measures the increase in national income that occurs

  as a result of immigration and that accrues to natives?

  immigration surplus
• Occurs when participants in the marketplace take into account other factors (e.g., race, sex) when making economic exchanges?

  labor market discrimination
• Labor market discrimination exists when workers who are productively equivalent are systematically paid different wages based on their race or ethnicity (or some other demographic characteristic unrelated to productivity)?

  true
• translates the notion of racial (or some other demographic

  characteristic) prejudice into the language of economics?

  taste discrimination
• If employer is prejudiced against blacks, he will act as if black workers costs 𝒘𝑩 (𝟏 + 𝒅) dollars where 𝒅 is a positive number called the?

  discrimination coefficient.
• Discrimination coefficient (𝒅 > 𝟎)

  1. Gives the % “markup” in the cost of hiring a worker attributable to the employer’s prejudice
  2. Employer's perceived cost exceeds actual cost
  3. ↑ 𝑑 means greater prejudice vice versa?
  4. true
• Implies that an employer’s utility-adjusted cost of hiring a favored worker equals 𝒘𝑩(1 − n) dollars, where “Nepotism coefficient” n is a positive number. For example: if black employers prefer to hire black workers, they will act as if hiring a black worker is cheaper than it actually is?

  nepotism
• The discrimination coefficient, therefore, “monetizes” prejudice, regardless of the source of prejudice (e.g., employer, employee, and customer)?

  true
• The prejudiced employer acts as if hiring a worker costs 𝑤𝐵 (1 + 𝑑)?

  employer discrimination
• A prejudice worker who dislikes alongside a black worker will act as if her wage is 𝑤𝑊(1 − 𝑑)?

  employee discrimination
• A prejudiced white worker buying from a black worker acts as if the price of the product is 𝑝(1 + 𝑑)?

  customer discrimination
• If the market-determined wage of the black worker is less than that of the white worker, (i.e., 𝑤𝐵 < 𝑤𝑊), a nondiscriminatory firm will hire black

  workers up to the point where the black wage equals their value of marginal product?

  true
• The employer will then hire whichever input has a lower utility-adjusted price

  Hire only blacks if 𝒘𝑩 (𝟏 + 𝒅) < 𝒘𝑾

  Hire only whites if 𝒘𝑩 (𝟏 + 𝒅) > 𝒘𝑾

  • Interpretation: if the wage of white workers is higher than the utility-adjusted wage of black workers, the firm will only hire black workers?

  discriminatory employer
• Hires workers up to the point where the wage of white workers equals the value of marginal product, or 𝒘𝒘 = 𝑽𝑴𝑷𝑬. Pays an excessively high price for its workers and hires relatively few workers

  (𝐸*w). White wage is expensive?

  prejudiced white firm
• Hires black workers up to the point where the utility-adjusted price of a black worker equals the value of marginal product, or 𝒘𝑩 (𝟏 + 𝒅) = 𝑽𝑴𝑷𝑬. Number of black workers hired, is smaller for firms that have larger d?

  prejudiced black firm
• Suppose whites dislike working alongside blacks: White workers act as if their wage rate is only 𝒘𝑾(𝟏 − 𝒅)?

  employee discrimination
• Purchasing decision of customer is not based on the actual price of the good 𝑝 but on the utility-adjusted price or 𝑝(1 + 𝑑), reducing the demand for goods and services sold by minorities (e.g., blacks)

  ● Customer discrimination can have an adverse impact on black wages when the firm cannot easily hide its black workers from public view.

  ● A firm employing a black worker in a sales position will have to lower the price of the product so as to compensate white buyers for their disutility?

  customer discrimination
• To measure the impact of customer discrimination, therefore, one needs a “control group”?

  true