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An Experimental Study of Statistical Discrimination by Employers

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  • Nick Feltovich

    ()
    (Department of Economics, University of Houston)

  • Chris Papageorgiou

    ()
    (Department of Economics, Louisiana State University)

Abstract

This article reports findings of an experiment motivated by a dynamic labor market model that considers the problem faced by employers in making hiring decisions between workers of different types. The question examined here is how quickly employers learn about the ability of a group of workers through observing representatives of that group. If prior opinions are weak, the employer will use information from the workplace to quickly update any incorrect group-based stereotypes it may have. On the other hand, if priors are heavily weighted, incorrect initial perceptions will result in persistent wage differences. Our experimental findings are twofold. First, subjects' (employers') behavior moves quickly toward optimal choices. Second, strong priors are hard to establish. These results suggest that it would take a long time for employers to form group-based stereotypes and that such stereotypes should go away quickly in response to signals that contradict these stereotypes.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 70 (2004)
Issue (Month): 4 (April)
Pages: 837-849

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Handle: RePEc:sej:ancoec:v:70:4:y:2004:p:837-849

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  1. Danielle Lewis & Dek Terrell, 2001. "Experience, Tenure, and the Perceptions of Employers," Southern Economic Journal, Southern Economic Association, vol. 67(3), pages 578-597, January.
  2. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  3. Altonji, Joseph G. & Blank, Rebecca M., 1999. "Race and gender in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 48, pages 3143-3259 Elsevier.
  4. David Card & Alan Krueger, 1990. "School Quality and Black/White Relative Earnings: A Direct Assessment," Working Papers 652, Princeton University, Department of Economics, Industrial Relations Section..
  5. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer learning and statistical discrimination," Working Paper Series, Macroeconomic Issues WP-97-11, Federal Reserve Bank of Chicago.
  6. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
  7. Sarin, Rajiv & Vahid, Farshid, 1999. "Payoff Assessments without Probabilities: A Simple Dynamic Model of Choice," Games and Economic Behavior, Elsevier, vol. 28(2), pages 294-309, August.
  8. Richard Startz & Lundberg, . "Private Discrimination and Social Intervention in Competitive Labor Markets," Rodney L. White Center for Financial Research Working Papers 19-81, Wharton School Rodney L. White Center for Financial Research.
  9. Farmer, Amy & Terrell, Dek, 1996. "Discrimination, Bayesian Updating of Employer Beliefs and Human Capital Accumulation," Economic Inquiry, Western Economic Association International, vol. 34(2), pages 204-19, April.
  10. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-62, December.
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Cited by:
  1. Rödin, Magnus & Özcan, Gülay, 2011. "Is It How You Look or Speak That Matters? - An Experimental Study Exploring the Mechanisms of Ethnic Discrimination," SULCIS Working Papers 2011:3, Stockholm University Linnaeus Center for Integration Studies - SULCIS.
  2. Magnus Rodin & Gulay Ozcan, 2013. "Is It How You Look or Speak That Matters? “An Experimental Study Exploring the Mechanisms of Ethnic Discrimination”," Working Papers 009, Bahcesehir University, Betam.
  3. Rödin, Magnus & Özcan, Gülay, 2011. "Is It How You Look or Speak That Matters? - An Experimental Study Exploring the Mechanisms of Ethnic Discrimination," Research Papers in Economics 2011:12, Stockholm University, Department of Economics.
  4. Thomas de Haan & Theo Offerman & Randolph Sloof, 2011. "Discrimination in the Labor Market: The Curse of Competition between Workers," Tinbergen Institute Discussion Papers 11-174/1, Tinbergen Institute.
  5. Thomas de Haan & Theo Offerman & Randolph Sloof, 2011. "Discrimination in the Labor Market: The Curse of Competition between Workers," Tinbergen Institute Discussion Papers 11-174/1, Tinbergen Institute.
  6. Antonio Filippin & Francesco Guala, 2013. "Costless discrimination and unequal achievements in an experimental tournament," Experimental Economics, Springer, vol. 16(3), pages 285-305, September.

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