Prof. Bryan Caplan

Econ 321

Fall, 2000


HW#5 (Please type all answers)


Answer problems #1, #2, #12, AND your choice of 7 other questions.


I.                     Provide an explanation other than pure discrimination that could account for the following group differences.  (You do not need to agree with your explanation; just try to make it plausible).

A.                Blacks with college degrees earn less than whites with college degrees.

B.                Married men without children earn more than single men.

C.                People with criminal records earn less than other people with identical education and intelligence.

D.                There are so few Asians in professional basketball.

E.                Japanese-Americans earn more than white Americans.

F.                 Teachers earn less than equally-educated non-teachers.

II.                   In chapter 16 of Landsburg's Fair Play, he works through two arithmetic examples on discrimination, and shows that a non-discriminating employers can increase stockholders' returns by 150%.  Using the numbers from his first example, recalculate the percentage increase in stockholders' returns if:

A.                (Sample problem)  All of Landsburg's numbers stay the same, except that blacks earn 90% as much as equally productive whites.


9 white workers @ $100,000  $900,000

1 black worker @ $90,000     $90,000

Bondholders               $240,000

Stockholders              $240,000


Total                    $1,440,000



10 black workers @ $90,000 $900,000

Bondholders                $240,000

Stockholders               $300,000


Total                      $1,440,000


The profits from hiring an all-black workforce are thus ($300,000/$240,000)=1.25 as large as those of a regular workforce; switching to an all-black workforce raises stockholder returns by 25%.


B.                All of Landsburg's numbers stay the same, except that bondholders and stockholders each receive half as much as the workers.

C.                All of Landsburg's numbers stay the same, except that bondholders receive 40% as much as workers, and stockholders receive 10% as much.

D.                All of Landsburg's numbers stay the same, except that the firm initial employs only .1 black workers.

III.                  Briefly (1-2 sentences each) explain what the preceding four examples show about the costliness of discrimination.

IV.               Discrimination is less costly when wages exceed market-clearing levels.  Is there any incentive for employers to avoid discrimination when wages are too high? (2-3 sentences)

V.                 Sowell (Race and Culture) discusses segregation of Jewish and Gentile workplaces.

A.                What efficiency rationale for this form of segregation does Sowell offer?

B.                What happened to this labor market in fields with small Jewish populations?


A.                Briefly, carefully, and neutrally state one stereotype that you are familiar with (but not necessarily in agreement with). 

B.                Would you expect this stereotype to be "self-fulfilling"?  Why or why not? 

C.                Search the world-wide web or consult another reference source to check the accuracy of your stereotype.  How close to the truth was your stereotype?

VII.              Suppose male and female employers are equally productive when employed, being worth $15/hr, and work 2000 hours/year.  But 10% of female employees (and 0% of males) under the age of 30 plan on leaving work to have children, costing their employers $15,000 in re-training expenses.

A.                Diagram the market for male and female labor if employers statistically discriminate.  How does the equilibrium female wage compare to the equilibrium male wage?

B.                How much are women who don't leave work underpaid relative to their productivity?  How much are women who do leave work overpaid relative to their productivity?

C.                What would happen to the male-female average wage gap if female employees could give their employer a "money-back guarantee"?

VIII.            Suppose that workers who speak fluent English are more productive than workers who don't speak fluent English.  Using S&D curves for both types of labor, show the effect of banning wage differences as "discriminatory."

IX.               Thinking in terms of the "market for mates," try to explain why men generally marry later than women. (2-3 sentences)

X.                 Discuss the impact of technological change since 1900 on BOTH supply AND demand for female labor. (2-3 sentences)

XI.               Give an example of statistical discrimination in the dating market and discuss its effects. (2-3 sentences)

XII.              Find an opinion piece in a newspaper or magazine that relies on either "the standard history of discrimination" or "the standard history of gender."  What aspects of the opinion piece would Caplan agree with?  What precisely would he disagree with? (1 paragraph)