Employer Discrimination and Racial Differences in Wages and Turnover

In this paper, I document the systematic differences in labor market experiences between US black and white male workers. I develop a dynamic (search-matching-bargaining) model of taste-based employer discrimination with on-the-job search by workers. Using data from NLSY79, I find that the extent of discrimination is significantly lower than what has been estimated elsewhere, although they vary slightly across specifications used. Discrimination accounts for between 5 percent to 12 percent of differences in mean wages between races, depending on the controls used. Differences in exogenous job-termination rates between races play an important role in generating wage differentials