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A Theory of Discrimination Based on Signaling and Strategic Information Acquisition

  • Ajit Mishra

    (University of Dundee)

The paper develops a `signaling' based theory of discrimination where workers face different incentives for skill acquisition purely because of their group membership. Workers belonging to the disadvantaged group bear substantial signaling cost. The difference in signaling costs between groups is not due to any unexplained group heterogeneity but discriminatory information policy of the employer. Based on its belief about the group, an employer may not acquire relevant information about the workers of this group, even if such information were costless. It is shown that affirmative action policies can help in the presence of non-convex signaling technology. Factors like co-ordination amongst workers, presence of a 'dynamic' labor market and sub-group formation seem to affect the nature and degree of discrimination.

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0675.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0675
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  1. Cremer, Jacques, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 275-95, May.
  2. Paul R. Milgrom, 1984. "Job Discrimination, Market Forces and the Invisibility Hypothesis," Cowles Foundation Discussion Papers 708R, Cowles Foundation for Research in Economics, Yale University, revised 1985.
  3. Milgrom, Paul R, 1988. "Employment Contracts, Influence Activities, and Efficient Organization Design," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 42-60, February.
  4. Richard Startz & Lundberg, . "Private Discrimination and Social Intervention in Competitive Labor Markets," Rodney L. White Center for Financial Research Working Papers 19-81, Wharton School Rodney L. White Center for Financial Research.
  5. Benoit, Jean-Pierre, 1999. "Color Blind Is Not Color Neutral: Testing Differences and Affirmative Action," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(2), pages 378-400, July.
  6. Cho, In-Koo & Sobel, Joel, 1990. "Strategic stability and uniqueness in signaling games," Journal of Economic Theory, Elsevier, vol. 50(2), pages 381-413, April.
  7. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  8. Coate, S. & Loury, G.C., 1992. "Will Affirmative Action Policies Eliminate Negative Stereotypes?," Papers 3, Boston University - Department of Economics.
  9. Lundberg, Shelly J, 1991. "The Enforcement of Equal Opportunity Laws under Imperfect Information: Affirmative Action and Alternatives," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 309-26, February.
  10. Glenn C. Loury, 1998. "Discrimination in the Post-Civil Rights Era: Beyond Market Interactions," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 117-126, Spring.
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