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Wages, Employment, and Statistical Discrimination: Evidence from the Laboratory

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  • David L. Dickinson
  • Ronald L. Oaxaca

Abstract

When membership in a particular group conveys valuable information about an individual’s skills, productivity, or other human capital characteristics, a non-prejudiced agent may still find it rational to statistically discriminate. We frame statistical discrimination in a labor market setting for a series of laboratory experiments. A main objective of our experiments is to examine how varying productivity risk along several dimensions impacts outcomes across worker groups. Our design expands upon existing research by generating laboratory data both on wage contracts and unemployment rates of directly competing worker groups. We find some evidence for statistical wage discrimination against workers with identical expected productivity but higher productivity variance. However, those same subjects are less likely to be unemployed, suggesting that our employers view hiring choice and wage contracts as substitutable. These laboratory results have interesting implications for labor markets where employers select from workers belonging to distinct statistical groups, and suggest that statistical discrimination based on wages alone may overestimate the true effect of such discrimination. Key Words:

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File URL: http://econ.appstate.edu/RePEc/pdf/wp1203.pdf
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Bibliographic Info

Paper provided by Department of Economics, Appalachian State University in its series Working Papers with number 12-03.

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Date of creation: 2012
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Handle: RePEc:apl:wpaper:12-03

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Postal: Thelma C. Raley Hall, Boone, North Carolina 28608
Phone: 828-262-2148
Fax: 828-262-6105
Web page: http://www.business.appstate.edu/departments/economics/
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  1. Ayres, Ian & Siegelman, Peter, 1995. "Race and Gender Discrimination in Bargaining for a New Car," American Economic Review, American Economic Association, vol. 85(3), pages 304-21, June.
  2. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 542-71, June.
  3. Davis, Douglas D., 1987. "Maximal quality selection and discrimination in employment," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 97-112, March.
  4. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, vol. 73(3), pages 340-47, June.
  5. David Dickinson & Ronald Oaxaca, 2004. "Statistical Discrimination in Labor Markets: An Experimental Analysis," Working Papers 2004-04, Utah State University, Department of Economics.
  6. Helen F. Ladd, 1998. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 41-62, Spring.
  7. Oaxaca, Ronald L. & Geisler, Iris, 2003. "Fixed effects models with time invariant variables: a theoretical note," Economics Letters, Elsevier, vol. 80(3), pages 373-377, September.
  8. Chaim Fershtman & Uri Gneezy, 2001. "Discrimination In A Segmented Society: An Experimental Approach," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 351-377, February.
  9. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical theories of discrimination in labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
  10. John List, 2004. "The nature and extent of discrimination in the marketplace: Evidence from the field," Natural Field Experiments 00299, The Field Experiments Website.
  11. Goldberg, Pinelopi Koujianou, 1996. "Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 622-54, June.
  12. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  13. Lang, Kevin, 1986. "A Language Theory of Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 363-82, May.
  14. Castillo, Marco & Petrie, Ragan, 2010. "Discrimination in the lab: Does information trump appearance?," Games and Economic Behavior, Elsevier, vol. 68(1), pages 50-59, January.
  15. David W. Harless & George E. Hoffer, 2002. "Do Women Pay More for New Vehicles? Evidence from Transaction Price Data," American Economic Review, American Economic Association, vol. 92(1), pages 270-279, March.
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