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An Experimental Study of Statistical Discrimination by Employers

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Author Info
Nick Feltovich () (Department of Economics, University of Houston)
Chris Papageorgiou () (Department of Economics, Louisiana State University)

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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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Publisher 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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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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  1. 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. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  3. 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.
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  4. Farmer, Amy & Terrell, Dek, 1996. "Discrimination, Bayesian Updating of Employer Beliefs and Human Capital Accumulation," Economic Inquiry, Oxford University Press, vol. 34(2), pages 204-19, April.
  5. 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.
  6. David Card & Alan B. Krueger, 1991. "School Quality and Black-White Relative Earnings: A Direct Assessment," NBER Working Papers 3713, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Kenneth Arrow, 1971. "The Theory of Discrimination," Working Papers 403, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  8. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
  9. 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. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
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  11. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning And Statistical Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 313-350, February. [Downloadable!] (restricted)
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