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Goldsmith, Arthur H.; Sedo, Stanley; Darity, William A., Jr.; & Hamilton, Darrick (2004). The Labor Supply Consequences of Perceptions of Employer Discrimination during Search and On-the-Job: Integrating Neoclassical Theory and Cognitive Dissonance. Journal of Economic Psychology, 25(1), 15-39.


This paper offers a theory of how a person’s perception that they face discrimination during job search influences their labor supply, and provides evidence on the relation between this form of perceived discrimination and subsequent labor supply. The theory is developed by extending the neoclassical theory of labor supply to incorporate the insights of Festinger’s theory of cognitive dissonance. A unique feature of our theory is that a person seeks simultaneously both an economic objective – utility maximization – and psychological balance. The theory we advance predicts that a person who faces job search discrimination is thrust into an unbalanced psychological state. This person will make cognitive adjustments to renew psychological balance. They are likely to change their beliefs about the quality of the job that they can expect to attain, which provides an incentive to reduce their labor supply. Alternatively, they may decide that a resume with more work experience is a superior way to restore cognitive consistency. This resume-based strategy generates an impulse to enhance labor supply. Therefore, efforts to restore psychological balance after exposure to job search discrimination may, on net, affect labor supply. Using data drawn from the Multi-City Study of Urban Inequality (MCSUI) this paper offers estimates of the impact on subsequent labor supply of perceived discrimination due to race, ethnicity, or gender while seeking a job and while on-the-job.


Reference Type

Journal Article

Year Published


Journal Title

Journal of Economic Psychology


Goldsmith, Arthur H.
Sedo, Stanley
Darity, William A., Jr.
Hamilton, Darrick