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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.

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  • 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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    3. Kertesi, Gábor & Köllő, János & Szabó, Lajos Tamás & Károlyi, Róbert, 2022. "Hogyan lesz az etnikai előítéletből foglalkoztatási diszkrimináció? A kisvállalatok szerepe [How does ethnic prejudice turn into employment discrimination? The role of small companies]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 1345-1376.
    4. Ayaita, Adam, 2021. "Labor Market Discrimination and Statistical Differences in Unobserved Characteristics of Applicants," EconStor Preprints 236615, ZBW - Leibniz Information Centre for Economics.
    5. Ilić, Dragan, 2018. "Prejudice in naturalization decisions: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 1-18.
    6. 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).
    7. Yana Gallen & Melanie Wasserman, 2022. "Does Information Affect Homophily?," Working Papers 2022-017, Human Capital and Economic Opportunity Working Group.
    8. Mauro Caselli & Paolo Falco, 2020. "As long as they are cheap. Experimental evidence on the demand for migrant workers," Discussion Papers 20-06, University of Copenhagen. Department of Economics.
    9. 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.
    10. Elisabeth Tovar & Mathieu Bunel, 2019. "Profit vs morality: how unfair is labor market discrimination? Results from a survey experiment," Post-Print hal-02459378, HAL.
    11. Brülhart, Marius & Klinke, Gian-Paolo & Marcucci, Andrea & Rohner, Dominic, 2023. "Price and Prejudice: Housing Rents Reveal Racial Animus," CEPR Discussion Papers 18050, C.E.P.R. Discussion Papers.
    12. 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.
    13. Batsaikhan, Mongoljin & Gørtz, Mette & Kennes, John & Lyng, Ran Sun & Monte, Daniel & Tumennasan, Norovsambuu, 2021. "Discrimination and Daycare Choice: Evidence from a Randomized Survey," IZA Discussion Papers 14874, Institute of Labor Economics (IZA).
    14. Broockman, David E. & Soltas, Evan J., 2020. "A natural experiment on discrimination in elections," Journal of Public Economics, Elsevier, vol. 188(C).
    15. Elena Cettolin & Sigrid Suetens, 2019. "Return on Trust is Lower for Immigrants," The Economic Journal, Royal Economic Society, vol. 129(621), pages 1992-2009.
    16. Mongoljin Batsaikhan & Mette Gørtz & John Kennes & Ran Sun Lyng & Daniel Monte & Norovsambuu Tumennasan, 2019. "Daycare Choice and Ethnic Diversity: Evidence from a Randomized Survey," Economics Working Papers 2019-02, Department of Economics and Business Economics, Aarhus University.
    17. Brülhart, Marius & Klinke, Gian-Paolo & Marcucci, Andrea & Rohner, Dominic, 2023. "Price and Prejudice: Housing Rents Reveal Racial Animus," CEPR Discussion Papers 18050, C.E.P.R. Discussion Papers.
    18. Emma von Essen & Jonas Karlsson, 2019. "The effect of competition on discrimination in online markets—Anonymity and selection," PLOS ONE, Public Library of Science, vol. 14(8), pages 1-18, August.

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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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