A Theory of Discrimination Based on Signaling and Strategic Information Acquisition
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.
|Date of creation:||01 Aug 2000|
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- Milgrom, Paul R, 1988.
"Employment Contracts, Influence Activities, and Efficient Organization Design,"
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- Richard Startz & Lundberg, "undated". "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.
- Jacques Crémer, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 275-295.
- 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.
- 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.
- Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
- Coate, S. & Loury, G.C., 1992. "Will Affirmative Action Policies Eliminate Negative Stereotypes?," Papers 3, Boston University - Department of Economics.
- 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. Full references (including those not matched with items on IDEAS)
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