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Government-Mandated Discriminatory Policies: Theory And Evidence

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  • Hanming Fang
  • Peter Norman

Abstract

We study an economy with private and public sectors in which workers invest in imperfectly observable skills that are important to the private sector but not to the public sector. Government regulation allows native majority workers to be employed in the public sector with positive probability while excluding the minority from it. We show that even when the public sector offers the highest wage rate, it is still possible that the discriminated group is, on average, economically more successful. The widening Chinese/Malay wage gap in Malaysia since the adoption of its New Economic Policy in 1970 supports our model. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Hanming Fang & Peter Norman, 2006. "Government-Mandated Discriminatory Policies: Theory And Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 361-389, May.
  • Handle: RePEc:ier:iecrev:v:47:y:2006:i:2:p:361-389
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    Cited by:

    1. Sato, Hiroshi & Li, Shi, 2007. "Class Origin, Family Culture, and Intergenerational Correlation of Education in Rural China," IZA Discussion Papers 2642, Institute for the Study of Labor (IZA).
    2. Sergey V. Popov & Dan Bernhardt, 2012. "Fraternities and Labor-Market Outcomes," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 116-141, February.
    3. Sato, Hiroshi & Li, Shi, 2013. "Influence Of Family Background On Current Family Wealth In Rural China," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 54(1), pages 95-117, June.
    4. Fabrizio Adriani & Silvia Sonderegger, 2013. "Signaling about norms: Socialization under strategic uncertainty," Discussion Papers 2013-11, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    5. Dahm, Matthias & Esteve, PatrĂ­cia,, 2013. "Affirmative Action through Extra Prizes," Working Papers 2072/222197, Universitat Rovira i Virgili, Department of Economics.
    6. Sato, Hiroshi & Li, Shi, 2007. "Revolution and Family in Rural China: Influence of Family Background on Current Family Wealth," IZA Discussion Papers 3223, Institute for the Study of Labor (IZA).
    7. Guha, Brishti & Roy Chowdhury, Prabal, 2017. "Affirmative Action in the Presence of a Creamy Layer: Identity or Class Based?," MPRA Paper 78686, University Library of Munich, Germany.
    8. Carvalho, Jean-Paul & Koyama, Mark, 2013. "Resisting Education," MPRA Paper 48048, University Library of Munich, Germany.

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