A monopsonistic approach to disability discrimination and non-discrimination

We use a simple model of monopsony to explain wage differences between the non-work-limited disabled and non-disabled. In this model, employers exploit the non-work-limited disabled workers and potential workers by offering them lower wages to increase profits, knowing that they face high search costs. We propose an extension of this model to account for the case where firms are not allowed, by law, to treat disabled and non-disabled differently. We show that non-discrimination improves the wage distribution for the non-work-limited disabled workers but worsens it for the non-disabled.