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Statistical Discrimination in Labor Markets: An Experimental Analysis

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  • David L. Dickinson
  • Ronald L. Oaxaca

Abstract

This article reports results from controlled laboratory experiments designed to study second‐moment (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.

Suggested Citation

  • David L. Dickinson & Ronald L. Oaxaca, 2009. "Statistical Discrimination in Labor Markets: An Experimental Analysis," Southern Economic Journal, John Wiley & Sons, vol. 76(1), pages 16-31, July.
    • Handle: RePEc:wly:soecon:v:76:y:2009:i:1:p:16-31
    DOI: 10.4284/sej.2009.76.1.16
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Discrimination (5): Statistical Discrimination
      by Filip Spagnoli in P.A.P.-Blog on 2010-07-24 13:39:28

    Citations

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    Cited by:

    1. Paulo Arvate & Lisa Lenz & Sergio Mittlaender, 2024. "Strategic discrimination and the emergence of systematic exclusion," Empirical Economics, Springer, vol. 66(3), pages 1383-1401, March.
    2. Baert, Stijn, 2015. "Hiring a Homosexual, Taking a Risk? A Lab Experiment on Employment Discrimination and Risk Aversion," IZA Discussion Papers 9536, IZA Network @ LISER.
    3. David Masclet & David L. Dickinson, 2025. "Incorporating conditional morality into economic decisions," Theory and Decision, Springer, vol. 98(1), pages 95-152, February.
    4. Eva O. Arceo-Gomez & Raymundo M. Campos-Vazquez, 2014. "Race and Marriage in the Labor Market: A Discrimination Correspondence Study in a Developing Country," American Economic Review, American Economic Association, vol. 104(5), pages 376-380, May.
    5. Gomes, Magno Rogério & Souza, Solange de Cássia Inforzato de & Mantovani, Gabriela Gomes & Paiva, Vanessa Fortunato de, 2019. "Wage gap decomposition models: A methodological contribution," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 39(2).
    6. Castillo, Marco & Petrie, Ragan, 2010. "Discrimination in the lab: Does information trump appearance?," Games and Economic Behavior, Elsevier, vol. 68(1), pages 50-59, January.
    7. Julien Picault, 2023. "A strategic approach to managerial compliance with equal pay policies," SN Business & Economics, Springer, vol. 3(8), pages 1-21, August.
    8. UCHIKOSHI, Fumiya & GAGNON, Etienne & YAMAGISHI, Atsushi, 2026. "Test-optional Admissions and Job Market Performance : Experimental Evidence from Japan," Discussion Paper Series 775, Institute of Economic Research, Hitotsubashi University.
    9. Lionel D siage, 2010. "What are Entrepreneurs Objectives When Starting a New Business?," TEPP Working Paper 2010-06, TEPP.
    10. Joshua Pitts & Daniel Yost, 2013. "Racial Position Segregation in Intercollegiate Football: Do Players become more Racially Segregated as they Transition from High School to College?," The Review of Black Political Economy, Springer;National Economic Association, vol. 40(2), pages 207-230, June.
    11. Harpreet Singh, 2024. "Does Labour Market Discriminate Against the Scheduled Castes? Empirical Evidence from Rural Punjab, India," Millennial Asia, , vol. 15(4), pages 620-639, December.
    12. Wehn‐Jyuan Tsai, 2023. "Immigration and inequality: Analysis of Mainland Chinese spouses during the early stages of their time in Taiwan," Pacific Economic Review, Wiley Blackwell, vol. 28(4), pages 519-551, October.
    13. Gomes, Magno Rogério & Souza, Solange de Cássia Inforzato de & Mantovani, Gabriela Gomes & Paiva, Vanessa Fortunato de, 2020. "Wage gap decomposition models: A methodological contribution," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 39(2), March.
    14. Zhisheng Chen, 2023. "Ethics and discrimination in artificial intelligence-enabled recruitment practices," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 10(1), pages 1-12, December.
    15. Katherine B. Coffman & Christine L. Exley & Muriel Niederle, 2021. "The Role of Beliefs in Driving Gender Discrimination," Management Science, INFORMS, vol. 67(6), pages 3551-3569, June.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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