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Statistical Discrimination in Labor Markets: An Experimental Analysis

  • David L. Dickinson

    ()

    (Department of Economics, Appalachian State University, Boone, NC 28607, USA)

  • Ronald L. Oaxaca

    ()

    (Department of Economics, University of Arizona, Tucson, AZ 85721-0108, USA)

This article reports results from controlled laboratory experiments designed to study secondmoment (that is, risk-based) statistical discrimination in a labor market setting. Since decision makers may not view risk in the same way as economists or statisticians (that is, risk 5 variance of distribution), we also examine alternative measures of risk: the support of the distribution and the probability of earning less than the expected (maximum) profits for the employer. Our results indicate that employers made statistically discriminatory wage offers consistent with loss aversion in our full sample (though the result is driven by the male employer subsample). If one can transfer these results outside of the laboratory, they indicate that discrimination estimates based only on first-moment (mean-based) discrimination are biased. The public policy implication is that efforts and legislation aimed at reducing discrimination of various sorts face an additional challenge in trying to identify and limit relatively hidden, but significant, forms of statistical discrimination.

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File URL: http://dx.doi.org/10.4284/sej.2009.76.1.16
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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 76 (2009)
Issue (Month): 1 (July)
Pages: 16-31

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Handle: RePEc:sej:ancoec:v:76:1:y:2009:p:16-31
Contact details of provider: Web page: http://www.southerneconomic.org/

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  1. Curley, Shawn P. & Yates, J. Frank, 1985. "The center and range of the probability interval as factors affecting ambiguity preferences," Organizational Behavior and Human Decision Processes, Elsevier, vol. 36(2), pages 273-287, October.
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  3. Helen F. Ladd, 1998. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 41-62, Spring.
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  10. Ayres, Ian & Siegelman, Peter, 1995. "Race and Gender Discrimination in Bargaining for a New Car," American Economic Review, American Economic Association, vol. 85(3), pages 304-21, June.
  11. Kenneth J. Arrow, 1998. "What Has Economics to Say about Racial Discrimination?," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 91-100, Spring.
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  13. Goldberg, Pinelopi Koujianou, 1996. "Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 622-54, June.
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  16. Vernon L. Smith, 1965. "Experimental Auction Markets and the Walrasian Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 73, pages 387.
  17. David Dickinson & Ronald Oaxaca, 2005. "The Equivalence of Panel Data Estimators under Orthogonal Experimental Design," Working Papers 05-07, Department of Economics, Appalachian State University.
  18. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 313-350.
  19. Chaim Fershtman & Uri Gneezy, 2001. "Discrimination in a Segmented Society: An Experimental Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 351-377.
  20. Davis, Douglas D., 1987. "Maximal quality selection and discrimination in employment," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 97-112, March.
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