Discrimination and growth: The distribution across skills matters

This paper examines the impact of differences in the degree of discrimination across skill levels in a model of endogenous growth. The impact of labor market discrimination on human capital formation and, hence, the rate of per capita growth depends on how wage differentials at low levels of skills compare to differentials at high levels of skills. From a policy perspective the analysis suggests that it is an eliminating discrimination at high skill levels relative to low skill levels that enhances the rate of growth.