The canonical supply{demand model of the wage returns to skill has been extremely in uential; however, it has faced several important challenges. Several studies show that the standard approach sometimes produces theoretically wrong-signed elasticities of substitution, yields counterintuitive...

The canonical supply-demand model of the wage returns to skill has been extremely influential; however, it has faced several important challenges. Several studies show that the standard approach sometimes produces theoretically wrong-signed elasticities of substitution, yields counterintuitive...

In this paper we analyze an equilibrium search model with threesources for wage andunemployment differentials among workers with the same (observed)human capital but different appearance (race): unobservedproductivity (skill), search intensities and discrimination (Becker 1957) due to an...