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Inaccurate Statistical Discrimination: An Identification Problem

Author

Listed:
  • J. Aislinn Bohren

    (University of Pennsylvania and Carnegie Mellon University)

  • Kareem Haggag

    (Carnegie Mellon University)

  • Alex Imas

    (Carnegie Mellon University)

  • Devin G. Pope

    (University of Chicago)

Abstract

Discrimination---differential treatment by group identity---is widely studied in economics.Its source is often categorized as taste-based or statistical (belief-based)---a valuable distinction for policy design and welfare analysis. We argue that in many situations, individuals may have inaccurate beliefs about the relevant characteristics of different groups. This possibility creates an identification problem when isolating the source of discrimination. When not accounted for, we show both theoretically and experimentally that such inaccurate statistical discrimination will be misclassified as taste-based. A review of the empirical discrimination literature in economics reveals the scope of this issue: a small minority of papers---fewer than 7%---consider inaccurate beliefs. We then examine two alternative methodologies for differentiating between these three sources of discrimination---varying the amount of information presented to evaluators and eliciting evaluators' beliefs. We propose a possible intervention: when presented with accurate information, we show that inaccurate statistical discrimination decreases.

Suggested Citation

  • J. Aislinn Bohren & Kareem Haggag & Alex Imas & Devin G. Pope, 2019. "Inaccurate Statistical Discrimination: An Identification Problem," PIER Working Paper Archive 19-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 17 Jul 2020.
  • Handle: RePEc:pen:papers:19-010
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    References listed on IDEAS

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    More about this item

    Keywords

    Discrimination; Inaccurate Beliefs; Model misspecification;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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