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Government-mandated discriminatory policies

  • Fang,H.
  • Norman,P.

    (University of Wisconsin-Madison, Social Systems Research Institute)

This paper provides a simple explanation for why some minority groups are economically successful, despite being subject to government-mandated discriminatory policies. We study an economy with private and public sectors in which workers invest in imperfectly observable skills that are important to the private sector but not to the public sector. A law allows native majority workers to be employed in the public sector with positive probability while excluding the minority from it. We show that even when the public sector offers the highest wage rate, it is still possible that the discriminated group is, on average, economically more successful. The reason is that the preferential policy lowers the majority's incentive to invest in imperfectly observable skills by exacerbating the informational free riding problem in the private sector labor market

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File URL: http://www.ssc.wisc.edu/econ/archive/wp2001-12r.pdf
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Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 12.

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Date of creation: 2001
Date of revision:
Handle: RePEc:att:wimass:200112
Contact details of provider: Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

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  1. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  2. Hanming Fang, 2001. "Social Culture and Economic Performance," American Economic Review, American Economic Association, vol. 91(4), pages 924-937, September.
  3. Andrea Moro & Peter Norman, . "Affirmative Action in a Competitive Economy," Penn CARESS Working Papers ca48ba70927f48a4e11034658, Penn Economics Department.
  4. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
  5. Gary S. Becker & Nigel Tomes, 1976. "Child Endowments, and the Quantity and Quality of Children," NBER Working Papers 0123, National Bureau of Economic Research, Inc.
  6. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-53, September.
  7. Peter Norman, 2003. "Statistical Discrimination and Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 70(3), pages 615-627, 07.
  8. Coate, S. & Loury, G.C., 1992. "Will Affirmative Action Policies Eliminate Negative Stereotypes?," Papers 3, Boston University - Department of Economics.
  9. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  10. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
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