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Government-mandated discriminatory policies

Author

Listed:
  • Fang,H.
  • Norman,P.

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

Abstract

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
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Fang,H. & Norman,P., 2001. "Government-mandated discriminatory policies," Working papers 12, Wisconsin Madison - Social Systems.
    • Handle: RePEc:att:wimass:200112
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    File URL: http://www.ssc.wisc.edu/econ/archive/wp2001-12r.pdf
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    References listed on IDEAS

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    1. Moro, Andrea & Norman, Peter, 2003. "Affirmative action in a competitive economy," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 567-594, March.
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    Cited by:

    1. Sato, Hiroshi & Li, Shi, 2007. "Class Origin, Family Culture, and Intergenerational Correlation of Education in Rural China," IZA Discussion Papers 2642, Institute of Labor Economics (IZA).
    2. Jimmy Chan & Erik Eyster, 2002. "Admission Impossible? Self Interest and Affirmative Action," Economics Working Paper Archive 479, The Johns Hopkins University,Department of Economics.
    3. Sato, Hiroshi & Li, Shi, 2007. "Revolution and Family in Rural China: Influence of Family Background on Current Family Wealth," IZA Discussion Papers 3223, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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