Taste-based Discrimination Theory

Suppose that employers in the United States have discriminatory preferences against Asian-Americans. All else equal, as the number of discriminatory firms decrease over time, the theory of preference-based discrimination would predict that:

• Asian-American relative wages would increase
• Asian-American relative wages would stay the same
• Asian-American relative wages would decrease
• It depends on whether Asian-Americans are gross substitutes or gross complements with other workers