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Job Discrimination, Market Forces, and the Invisibility Hypothesis

Paul Milgrom and Sharon Oster
The Quarterly Journal of Economics
Vol. 102, No. 3 (Aug., 1987), pp. 453-476
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/1884213
Page Count: 24
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Job Discrimination, Market Forces, and the Invisibility Hypothesis
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Abstract

The Invisibility Hypothesis holds that the job skills of disadvantaged workers are not easily discovered by potential new employers, but that promotion enhances visibility and alleviates this problem. Then, at a competitive labor market equilibrium, firms profit by hiding talented disadvantaged workers in low-level jobs. Consequently, those workers are paid less on average and promoted less often than others with the same education and ability. As a result of the inefficient and discriminatory wage and promotion policies, disadvantaged workers experience lower returns to investments in human capital than other workers.

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