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Discrimination, Bayesian Updating of Employer Beliefs and Human Capital Accumulation

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  • Farmer, Amy
  • Terrell, Dek

Abstract

This article proposes a dynamic labor market discrimination model based on Bayesian updating of beliefs by the employer. The employer forms initial beliefs of worker ability conditional on group and updates his beliefs each period based on observed output. Inaccurate initial priors lead to diminished human capital investment among members of the undervalued group and may generate inequities lasting many periods or even permanently. Statistical discrimination models in which differing variances drive the inequity are special cases of the model. Copyright 1996 by Oxford University Press.

Suggested Citation

  • Farmer, Amy & Terrell, Dek, 1996. "Discrimination, Bayesian Updating of Employer Beliefs and Human Capital Accumulation," Economic Inquiry, Western Economic Association International, vol. 34(2), pages 204-219, April.
    • Handle: RePEc:oup:ecinqu:v:34:y:1996:i:2:p:204-19
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    Citations

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    Cited by:

    1. Nick Feltovich & Chris Papageorgiou, 2004. "An Experimental Study of Statistical Discrimination by Employers," Southern Economic Journal, John Wiley & Sons, vol. 70(4), pages 837-849, April.
    2. Christian Pfeifer & Tatjana Sohr, 2009. "Analysing the Gender Wage Gap (GWG) Using Personnel Records," LABOUR, CEIS, vol. 23(2), pages 257-282, June.
    3. Leung, Ming D., 2016. "Learning to hire? Hiring as a dynamic experiential process in an online market for contract labor," Institute for Research on Labor and Employment, Working Paper Series qt6z86b2vx, Institute of Industrial Relations, UC Berkeley.
    4. Grotti, Raffaele & Russell, Helen & Fahey, Éammon & Maître, Bertrand, 2018. "Discrimination and inequality in housing in Ireland," Research Series, Economic and Social Research Institute (ESRI), number BKMNEXT361, June.
    5. Rodney Fort & Andrew Gill, 2000. "Race and Ethnicity Assessment in Baseball Card Markets," Journal of Sports Economics, , vol. 1(1), pages 21-38, February.
    6. Barth, Erling & Bratsberg, Bernt & Raaum, Oddbjørn, 2012. "Immigrant wage profiles within and between establishments," Labour Economics, Elsevier, vol. 19(4), pages 541-556.
    7. Proto, Eugenio & Sgroi, Daniel, 2012. "Self-Centered Beliefs : An Empirical Approach," The Warwick Economics Research Paper Series (TWERPS) 978, University of Warwick, Department of Economics.
    8. Thierry Verdier & Yves Zenou, 2004. "Racial Beliefs, Location, And The Causes Of Crime," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 731-760, August.
    9. Bunzel, Helle & Marcoul, Philippe, 2008. "Can racially unbiased police perpetuate long-run discrimination?," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 36-47, October.
    10. David Neumark, 1998. "Labor Market Information and Wage Differentials by Race and Sex," NBER Working Papers 6573, National Bureau of Economic Research, Inc.
    11. Ruzzier, Christian A. & Woo, Marcelo D., 2023. "Discrimination with inaccurate beliefs and confirmation bias," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 379-390.
    12. Ming D. LeungMing D. Leung, 2018. "Learning to Hire? Hiring as a Dynamic Experiential Learning Process in an Online Market for Contract Labor," Management Science, INFORMS, vol. 64(12), pages 5671-5668, December.
    13. Devah Pager & Diana Karafin, 2009. "Bayesian Bigot? Statistical Discrimination, Stereotypes, and Employer Decision Making," The ANNALS of the American Academy of Political and Social Science, , vol. 621(1), pages 70-93, January.
    14. Proto, Eugenio & Sgroi, Daniel, 2017. "Biased beliefs and imperfect information," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 186-202.
    15. Danielle Lewis & Dek Terrell, 2001. "Experience, Tenure, and the Perceptions of Employers," Southern Economic Journal, John Wiley & Sons, vol. 67(3), pages 578-597, January.
    16. Cléo Chassonnery-Zaïgouche, 2015. "Crossing Boundaries, Displacing Previous Knowledge and Claiming Superiority: Is the Economics of Discrimination a Conquest of Economics Imperialism?," STOREPapers 5_2015, Associazione Italiana per la Storia dell'Economia Politica - StorEP.
    17. Verdier, T. & Zenou, Y., 2001. "Racial beliefs, location and the causes of crime," Discussion Paper Series In Economics And Econometrics 0101, Economics Division, School of Social Sciences, University of Southampton.
    18. Leung, Ming D, 2017. "Learning to hire? Hiring as a dynamic experiential learning process in an online market for contract labor," Institute for Research on Labor and Employment, Working Paper Series qt5rj3f9xg, Institute of Industrial Relations, UC Berkeley.
    19. Arthur H. Goldsmith & Darrick Hamilton & William Darity, 2006. "Does a Foot in the Door Matter? White–Nonwhite Differences in the Wage Return to Tenure and Prior Workplace Experience," Southern Economic Journal, John Wiley & Sons, vol. 73(2), pages 267-306, October.
    20. Pfeifer, Christian & Sohr, Tatjana, 2008. "Analysing the Gender Wage Gap Using Personnel Records of a Large German Company," IZA Discussion Papers 3533, Institute of Labor Economics (IZA).

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