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The Price of Prejudice

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  • Morten Størling Hedegaard
  • Jean-Robert Tyran

Abstract

We present a new type of field experiment to investigate ethnic prejudice in the workplace. Our design allows us to study how potential discriminators respond to changes in the cost of discrimination. We find that ethnic discrimination is common but highly responsive to the "price of prejudice," i.e., to the opportunity cost of choosing a less productive worker on ethnic grounds. Discriminators are on average willing to forego 8 percent of their earnings to avoid a coworker of the other ethnic type. The evidence suggests that animus rather than statistical discrimination explains observed behavior.

Suggested Citation

  • Morten Størling Hedegaard & Jean-Robert Tyran, 2018. "The Price of Prejudice," American Economic Journal: Applied Economics, American Economic Association, vol. 10(1), pages 40-63, January.
  • Handle: RePEc:aea:aejapp:v:10:y:2018:i:1:p:40-63
    Note: DOI: 10.1257/app.20150241
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    Cited by:

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    2. Ilić, Dragan, 2018. "Prejudice in naturalization decisions: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 1-18.
    3. Lippens, Louis & Baert, Stijn & Derous, Eva, 2021. "Loss aversion in taste-based employee discrimination: Evidence from a choice experiment," Economics Letters, Elsevier, vol. 208(C).
    4. Hou, Yue & Liu, Chuyu & Crabtree, Charles, 2020. "Anti-muslim bias in the Chinese labor market," Journal of Comparative Economics, Elsevier, vol. 48(2), pages 235-250.
    5. Halla, Martin & Kah, Christopher & Sausgruber, Rupert, 2021. "Testing for Ethnic Discrimination in Outpatient Health Care: Evidence from a Field Experiment in Germany," Department of Economics Working Paper Series 319, WU Vienna University of Economics and Business.
    6. Mauro Caselli & Paolo Falco, 2020. "As Long as They are Cheap Experimental Evidence on the Demand for Migrant Workers," Development Working Papers 466, Centro Studi Luca d'Agliano, University of Milano, revised 08 Sep 2020.
    7. Mongoljin Batsaikhan & Mette Gørtz & John Kennes & Ran Sun Lyng & Daniel Monte & Norovsambuu Tumennasan, 2021. "Discrimination and Daycare Choice: Evidence from a Randomized Survey," CEBI working paper series 19-14, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    8. Élisabeth Tovar & Matthieu Bunel, 2021. "Attitudes on past-in-present educational discrimination. Insights from a representative factorial survey," EconomiX Working Papers 2021-28, University of Paris Nanterre, EconomiX.
    9. Broockman, David E. & Soltas, Evan J., 2020. "A natural experiment on discrimination in elections," Journal of Public Economics, Elsevier, vol. 188(C).
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    11. Cettolin, Elena & Suetens, Sigrid, 2017. "Return on trust is lower for immigrants," CEPR Discussion Papers 12244, C.E.P.R. Discussion Papers.
    12. Ayaita, Adam, 2021. "Labor Market Discrimination and Statistical Differences in Unobserved Characteristics of Applicants," EconStor Preprints 236615, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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