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Discrimination in the Labor Market: The Curse of Competition between Workers

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  • Thomas de Haan

    (University of Amsterdam)

  • Theo Offerman

    (University of Amsterdam)

  • Randolph Sloof

    ()

Abstract

In the labor market, statistical discrimination occurs when employers' beliefs about workers' behavior induce different groups of workers to invest at different rates in their education. Thus, even though groups may be identical ex-ante, the beliefs of the employers are self-fulfilling. Theoretically and in an experiment, we investigate under what circumstances statistical discrimination occurs. We confirm the experimental results of Fryer, Goeree and Holt (2005) who do not find systematic evidence for statistical discrimination in the standard no-competition setup of Coate and Loury (1993). When we introduce competition between workers of different groups, the non-discrimination equilibrium ceases to be stable. In line with this theoretical observation, we find systematic discrimination in the experimental treatment with competition. Nevertheless, a substantial minority of the employers refuses to discriminate even when it is in their best interest to do so. A refined model that allows a fraction of the employers to remain color blind organizes the main patterns in the data.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-174/1.

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Date of creation: 11 Dec 2011
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Handle: RePEc:dgr:uvatin:20110174

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Related research

Keywords: Statistical discrimination; labor market; competition; experiment;

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References

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  1. Nick Feltovich & Chris Papageorgiou, 2004. "An Experimental Study of Statistical Discrimination by Employers," Southern Economic Journal, Southern Economic Association, vol. 70(4), pages 837-849, April.
  2. James Andreoni & Ragan Petrie, 2005. "Beauty, Gender and Stereotypes: Evidence from Laboratory Experiments," Experimental Economics Center Working Paper Series 2006-22, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
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  5. Daniel Zizzo, 2011. "You are not in my boat: common fate and discrimination against outgroup members," International Review of Economics, Springer, vol. 58(1), pages 91-103, March.
  6. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226041162, February.
  7. Miller, Ross M. & Plott, Charles R., . "Product Quality Signaling in Experimental Markets," Working Papers 447, California Institute of Technology, Division of the Humanities and Social Sciences.
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  9. Klaus Abbink & Jordi Brandts & Benedikt Herrmann & Henrik Orzen, 2010. "Intergroup Conflict and Intra-group Punishment in an Experimental Contest Game," American Economic Review, American Economic Association, vol. 100(1), pages 420-47, March.
  10. Dora L. Costa & Matthew E. Kahn, 2008. "Learning from the Past," NBER Chapters, in: Heroes and Cowards: The Social Face of War National Bureau of Economic Research, Inc.
  11. Muriel Niederle & Carmit Segal & Lise Vesterlund, 2008. "How Costly is Diversity? Affirmative Action in Light of Gender Differences in Competitiveness," NBER Working Papers 13923, National Bureau of Economic Research, Inc.
  12. Shaun P. Hargreaves Heap & Daniel John Zizzo, 2009. "The Value of Groups," American Economic Review, American Economic Association, vol. 99(1), pages 295-323, March.
  13. William A. Darity & Patrick L. Mason, 1998. "Evidence on Discrimination in Employment: Codes of Color, Codes of Gender," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 63-90, Spring.
  14. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2007. "Is There a Glass Ceiling over Europe? Exploring the Gender Pay Gap across the Wage Distribution," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(2), pages 163-186, January.
  15. Fryer, Roland & List, John A. & Levitt, Steven D., 2008. "Exploring the Impact of Financial Incentives on Stereotype Threat: Evidence from a Pilot Study," Scholarly Articles 2961941, Harvard University Department of Economics.
  16. P. A. Riach & J. Rich, 2002. "Field Experiments of Discrimination in the Market Place," Economic Journal, Royal Economic Society, vol. 112(483), pages 480-518, November.
  17. Gary Charness & Luca Rigotti & Aldo Rustichini, 2007. "Individual Behavior and Group Membership," American Economic Review, American Economic Association, vol. 97(4), pages 1340-1352, September.
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