Car ownership and the labor market of ethnic minorities

Abstract

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

Job Accessibility, Employment and Job-Education Mismatch in the Metropolitan Area of Barcelona

“…For those living far from job centres, cars are quicker and are often the only alternative for connecting places of residence and job opportunities. Therefore, since workers who are limited to using public transport to commute will usually face higher time costs to reach the same job opportunities as car users, alternative modes of transport must be taken into account when explaining spatial differences in labour market outcomes (see Gautier & Zenou, 2010 for more 2 A second relevant mechanism is that workers may refuse a job that requires commuting costs that are too high in relation to the wage offered. This mechanism would apply only to the most disadvantaged groups and, since in this paper we consider the whole population of workers (taking into account gender differences), we retain the job search explanation to build up the theoretical justification for this current study.…”

Commuting, Wages and Bargaining Power

“…Van den Berg and Gorter (1997) find that among demographic groups, females with children face a higher disutility of commuting, while being in a region with higher unemployment reduces this disutility parameter. Gautier and Zenou (2008) show that the cost and difficulty of black workers to buy a car leads to an amplification of spatial mismatch, that is, the difficulty of black workers to access jobs located in suburbs.…”

Thick market externalities in a spatial model

“…More closely related to the present paper are Rouwendal (1998) and Gautier and Zenou (2010), in which workers choose the maximum commute to tolerate in a labor market with search frictions in much the same way that agents in the present model choose the maximum distance over which to conduct their search. In accepting a job offer, workers in the models of Rouwendal (1998) and Gautier and Zenou (2010) are committing to a longterm relationship while giving up the option to continue searching. Hence, the decision problems are somewhat more complex than those faced by agents in the present model, in which matches are formed and then dissolved in the very next instant.…”

“…It turns out that this increase in the expected trade cost just offsets the increase in the expected net utility of consumption with a given expected trade cost -the amount in (17) . The coincidence can be understood as an instance of the Envelope theorem.…”