We show how initial wealth differences between low-skilled minorities and white workers can generate differences in their labor-market outcomes. This even occurs in the absence of a taste for discrimination against ethnic minorities or exogenous differences in distance to jobs. Because of the initial wealth difference, minorities cannot afford to buy a car while whites can. Car ownership allows whites to reach more jobs per unit of time, which gives them a better bargaining position in the labor market. As a result, in equilibrium, ethnic minorities end up with both higher unemployment rates and lower wages than whites. Furthermore, we also show that it takes more time for minorities to reach their jobs even though they travel less miles when employed. Those predictions are consistent with the data. Better access to capital markets or better public transportation will reduce the differences in labor-market outcomes.

Additional Metadata
Keywords Ethnic minorities, Job search, Multiple job centers, Spatial labor markets, Transportation mismatch
Persistent URL dx.doi.org/10.1016/j.jue.2009.11.005, hdl.handle.net/1765/19383
Citation
Gautier, P.A, & Zenou, Y. (2010). Car ownership and the labor market of ethnic minorities. Journal of Urban Economics, 67(3), 392–403. doi:10.1016/j.jue.2009.11.005