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Statistical Discrimination and Efficiency

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  • Peter Norman

Abstract

This paper asks whether statistical discrimination is a market failure. I consider the problem for a utilitarian social planner who operates in an environment that can generate statistical discrimination as an equilibrium phenomenon. It is found that there are potential efficiency gains from discrimination in terms of reduced "mismatch" between workers and jobs. Whether the solution to the planning problem involves discrimination depends on the trade-off between the informational gains of specialization and the losses in terms of increased investment costs. Copyright 2003, Wiley-Blackwell.

Suggested Citation

  • Peter Norman, 2003. "Statistical Discrimination and Efficiency," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 615-627.
  • Handle: RePEc:oup:restud:v:70:y:2003:i:3:p:615-627
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00258
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    Citations

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    Cited by:

    1. David Comerford & Jose V Rodriguez Mora & Michael J Watts, 2017. "The rise of meritocracy and the inheritance of advantage," Working Papers 1716, University of Strathclyde Business School, Department of Economics.
    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. Lommerud, Kjell Erik & Straume, Odd Rune & Vagstad, Steinar, 2015. "Mommy tracks and public policy: On self-fulfilling prophecies and gender gaps in hiring and promotion," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 540-554.
    4. Hanming Fang, 2001. "Social Culture and Economic Performance," American Economic Review, American Economic Association, vol. 91(4), pages 924-937, September.
    5. Dragos BIGU, 2009. "Discrimination and Profit," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(5), pages 1021-1027, December.
    6. Kim, Young Chul & Loury, Glenn, 2009. "Group Reputation and the Dynamics of Statistical Discrimination," MPRA Paper 18765, University Library of Munich, Germany.
    7. Raymond Fisman & Daniel Paravisini & Vikrant Vig, 2017. "Cultural Proximity and Loan Outcomes," American Economic Review, American Economic Association, vol. 107(2), pages 457-492, February.
    8. Fang,H. & Norman,P., 2001. "Government-mandated discriminatory policies," Working papers 12, Wisconsin Madison - Social Systems.
    9. Lommerud, Kjell Erik & Vagstad, Steinar, 2000. "Mommy Tracks and Public Policy: On Self-Fulfilling Prophecies and Gender Gaps in Promotion," CEPR Discussion Papers 2378, C.E.P.R. Discussion Papers.
    10. Shubham Chaudhuri & Rajiv Sethi, 2003. "Statistical Discrimination with Neighborhood Effects: Can Integration Eliminate Negative Stereotypes?," Game Theory and Information 0312001, University Library of Munich, Germany.
    11. Bøg, Martin & Kranendonk, Erik, 2011. "Labor market discrimination of minorities? yes, but not in job offers," MPRA Paper 33332, University Library of Munich, Germany.
    12. Schwager, Robert, 2012. "Grade inflation, social background, and labour market matching," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 56-66.
    13. Pfeifer, Christian & Sohr, Tatjana, 2008. "Analysing the Gender Wage Gap Using Personnel Records of a Large German Company," IZA Discussion Papers 3533, Institute for the Study of Labor (IZA).
    14. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2004. "The Economics of Discrimination: Equity, Equality and Diversity in the New European Constitution," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 84-95, October.
    15. Nicola Persico, 2002. "Racial Profiling, Fairness, and Effectiveness of Policing," American Economic Review, American Economic Association, vol. 92(5), pages 1472-1497, December.

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