Labor Market Discrimination and the Racial Unemployment Gap: Can Monetary Policy Make a Difference?

Thu, 01 Jan 2026 00:00:00 +0000

This paper addresses two connected questions: why do Black workers face persistently higher and more volatile unemployment than white workers, and can the Federal Reserve’s August 2020 shift from a symmetric “Deviations” rule to a “Shortfalls” rule narrow the resulting racial unemployment gap? The authors build a New Keynesian search and matching model with endogenous separations (Mortensen-Pissarides) and add employer taste-based discrimination, calibrated to U.S. Current Population Survey microdata from January 1976 to December 2019.

Avi Lipton | Macro Paper Warehouse

Labor Market Discrimination and the Racial Unemployment Gap: Can Monetary Policy Make a Difference?