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Incentives for discrimination

Author

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  • Mialon, Sue H.
  • Yoo, Seung Han

Abstract

This paper models employers’ incentives for discrimination against ex ante identical groups of workers when the workers must compete for a limited number of positions. Employers benefit from discrimination against minority workers because it can reduce the overall risk from workers’ noisy signals by increasing the expected quality of “majority” workers and their chance to win the competition for the limited number of positions. We show that employers can influence the selection of a discriminatory equilibrium by choosing the set of finalists in competition primarily from a majority group, and favoring them when the two groups are equally qualified. We discuss the implications of equal opportunity laws in this context.

Suggested Citation

  • Mialon, Sue H. & Yoo, Seung Han, 2017. "Incentives for discrimination," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 141-160.
  • Handle: RePEc:eee:jeborg:v:136:y:2017:i:c:p:141-160
    DOI: 10.1016/j.jebo.2017.01.021
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    References listed on IDEAS

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    1. Lawrence E. Blume, 2005. "Learning and Statistical Discrimination," American Economic Review, American Economic Association, vol. 95(2), pages 118-121, May.
    2. Jingfeng Lu, 2009. "Auction design with opportunity cost," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(1), pages 73-103, January.
    3. Kevin Lang, 1986. "A Language Theory of Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 363-382.
    4. Moro, Andrea & Norman, Peter, 2004. "A general equilibrium model of statistical discrimination," Journal of Economic Theory, Elsevier, vol. 114(1), pages 1-30, January.
    5. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
    6. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 542-571, June.
    7. Shubham Chaudhuri & Rajiv Sethi, 2008. "Statistical Discrimination with Peer Effects: Can Integration Eliminate Negative Stereotypes?," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 579-596.
    8. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    9. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-599, June.
    10. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical Theories of Discrimination in Labor Markets," ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
    11. repec:eee:labchp:v:1:y:1986:i:c:p:693-785 is not listed on IDEAS
    12. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
    13. Larry Samuelson & George J. Mailath & Avner Shaked, 2000. "Endogenous Inequality in Integrated Labor Markets with Two-Sided Search," American Economic Review, American Economic Association, vol. 90(1), pages 46-72, March.
    14. Fryer, Roland, 2007. "Belief Flipping in a Dynamic Model of Statistical Discrimination," Scholarly Articles 2955768, Harvard University Department of Economics.
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    More about this item

    Keywords

    Statistical discrimination; Group inequality; Asymmetric information; Cross-group risks;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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