October 2008

IZA DP No. 3748: The Measurement of Racial Discrimination in Pay between Job Categories: Theory and Test

published as 'The Measurement of Pay Discrimination Between Job Assignments' in: Labour Economics, 2011, 18 (3), 297-309

The traditional model of taste discrimination in labor markets presumes perfect substitution, making it unsuitable for the measurement of discrimination across job assignments. We extend the model to explain cross-assignment discrimination and test it on data from Major League Baseball. A competitive firm with a Generalized Leontief production function fills each job assignment with whites and nonwhites in an environment of customer prejudice. According to the model, cross-assignment discrimination depends upon racial productivity differences, the productivity x prejudice interaction, technology, relative labor supply and racial integration. We find strong evidence of ceteris paribus racial salary differences between hitters and pitchers.