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The Price of Prejudice

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  • Tyran, Jean-Robert
  • Hedegaard, Morten

Abstract

We present a new type of field experiment to investigate ethnic prejudice in the workplace. Our design allows us to study how potential discriminators respond to changes in the cost of discrimination. We find that ethnic discrimination is common but remarkably responsive to the "price of prejudice", i.e. to the opportunity cost of choosing a less productive worker on ethnic grounds. In addition, we find that the standard theory of statistical discrimination fails to explain observed choices, and that taking ethnic prejudice into account helps to predict the incidence of discrimination.

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  • Tyran, Jean-Robert & Hedegaard, Morten, 2014. "The Price of Prejudice," CEPR Discussion Papers 9953, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9953
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    More about this item

    Keywords

    Discrimination; Field experiment; Labor market;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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