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In his seminal contribution, Gary Becker (1957) suggests that rents in noncompetitive industries provide employers with the latitude to engage in earnings discrimination. Implicit in this theory, is that white workers in noncompet­itive industries would capture a disproportion­ ate share of monopoly rents (excessive wages) relative to their minority counterparts. We utilize wage-change equations to exam­ine earnings shifts for whites and minorities stemming from a job switch to a different mar­ket structure. Additionally for each racial group, wage equations of workers before and after the job change are used to calculate difference­ in-differences estimates of wage change as a result of the job switch. The findings contradict the stated hypothesis: gains in minority wages from joining noncompetitive industries and losses in wages from leaving are larger, suggesting that (for minorities) the higher, less discriminatory wages of union employment in noncompetitive indus­tries outweigh employer discrimination in non­-union, noncompetitive industries.


Copyright © 2001 American Economic Association. Reprinted with permission. All rights reserved.