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A Characterisation of ‘Phelpsian’ Statistical Discrimination

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  • Christopher P Chambers
  • Federico Echenique

Abstract

We establish that a type of statistical discrimination—that based on informativeness of signals about workers’ skills and the ability appropriately to match workers to tasks—is possible if and only if it is impossible uniquely to identify the signal structure observed by an employer from a realised empirical distribution of skills. The impossibility of statistical discrimination is shown to be equivalent to the existence of a fair, skill-dependent, remuneration for workers. Finally, we connect the statistical discrimination literature to Bayesian persuasion, establishing that if discrimination is absent, then the optimal signalling problem results in a linear pay-off function (as well as a kind of converse).

Suggested Citation

  • Christopher P Chambers & Federico Echenique, 2021. "A Characterisation of ‘Phelpsian’ Statistical Discrimination," The Economic Journal, Royal Economic Society, vol. 131(637), pages 2018-2032.
    • Handle: RePEc:oup:econjl:v:131:y:2021:i:637:p:2018-2032.
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    File URL: http://hdl.handle.net/10.1093/ej/ueaa107
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    Cited by:

    1. Jean-Paul Carvalho & Bary S. R. Pradelski & Cole Williams, 2025. "Intersectionality: Affirmative Action with Multidimensional Identities," Management Science, INFORMS, vol. 71(5), pages 4495-4509, May.

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