IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/54950.html
   My bibliography  Save this paper

Collective Reputation and the Dynamics of Statistical Discrimination

Author

Listed:
  • Kim, Young-Chul
  • Loury, Glenn

Abstract

Economists have developed theoretical models identifying self-fulfilling expectations as an important source of statistical discrimination in labor markets (Arrow, 1973). The static models dominating the literature of statistical discrimination, however, may leave the false impression that a bad equilibrium is as fragile as a "bubble" and can burst at any moment when expectations flip. Such models thus understate the adversity that disadvantaged groups face in seeking to escape bad equilibria. By developing a dynamic version of a statistical discrimination model based on Coate and Loury's (1993) original setup, we clarify the limits of expectations-related fragility. We show that when a group is strongly affected by negative reputational externalities, the group cannot escape a low skill investment trap, regardless of how expectations are formed. By examining the evolution of stereotypes in this way, we also provide new insights into egalitarian policies.

Suggested Citation

  • Kim, Young-Chul & Loury, Glenn, 2012. "Collective Reputation and the Dynamics of Statistical Discrimination," MPRA Paper 54950, University Library of Munich, Germany, revised 31 Mar 2014.
    • Handle: RePEc:pra:mprapa:54950
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/54950/1/MPRA_paper_54950.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Shubham Chaudhuri & Rajiv Sethi, 2008. "Statistical Discrimination with Peer Effects: Can Integration Eliminate Negative Stereotypes?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(2), pages 579-596.
    2. Moro, Andrea & Norman, Peter, 2004. "A general equilibrium model of statistical discrimination," Journal of Economic Theory, Elsevier, vol. 114(1), pages 1-30, January.
    3. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 651-667.
    4. Levin Jonathan, 2009. "The Dynamics of Collective Reputation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, August.
    5. Fryer, Roland Jr., 2007. "Belief flipping in a dynamic model of statistical discrimination," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1151-1166, June.
    6. 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.
    7. Lawrence E. Blume, 2006. "The Dynamics of Statistical Discrimination," Economic Journal, Royal Economic Society, vol. 116(515), pages 480-498, November.
    8. Fryer, Roland, 2007. "Belief Flipping in a Dynamic Model of Statistical Discrimination," Scholarly Articles 2955768, Harvard University Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:cep:stieop:56 is not listed on IDEAS
    2. Lily Hu & Yiling Chen, 2017. "A Short-term Intervention for Long-term Fairness in the Labor Market," Papers 1712.00064, arXiv.org, revised Feb 2018.
    3. Kim, Young-Chul & Loury, Glenn C., 2019. "To be, or not to be: Stereotypes, identity choice and group inequality," Journal of Public Economics, Elsevier, vol. 174(C), pages 36-52.
    4. Guo Xu, 2015. "How Does Collective Reputation Affect Hiring? Selection and Sorting in an Online Labour Market," STICERD - Economic Organisation and Public Policy Discussion Papers Series 056, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kim, Young Chul & Loury, Glenn, 2009. "Group Reputation and the Dynamics of Statistical Discrimination," MPRA Paper 18765, University Library of Munich, Germany.
    2. Mialon, Sue H. & Yoo, Seung Han, 2017. "Incentives for discrimination," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 141-160.
    3. Rosa, Benjamin, 2022. "Diversity versus Equity in Government Contracting," MPRA Paper 114765, University Library of Munich, Germany.
    4. Thomas Breda & Son Thierry Ly, 2012. "Do Professors Really Perpetuate the Gender Gap in Science? Evidence from a Natural Experiment in a French Higher Education Institution," CEE Discussion Papers 0138, Centre for the Economics of Education, LSE.
    5. Rune V. Lesner, 2016. "Testing for Statistical Discrimination based on Gender," Economics Working Papers 2016-07, Department of Economics and Business Economics, Aarhus University.
    6. Simon Quinn & Tom Gole, 2014. "Committees and Status Quo Bias: Structural Evidence from a Randomized Field Experiment," Economics Series Working Papers 733, University of Oxford, Department of Economics.
    7. Federico Echenique & Anqi Li, 2022. "Rationally Inattentive Statistical Discrimination: Arrow Meets Phelps," Papers 2212.08219, arXiv.org, revised Nov 2023.
    8. Thomas Breda & Son Thierry Ly, 2012. "Do professors really perpetuate the gender gap in science? Evidence from a natural experiment in a French higher education institution," Working Papers halshs-00677438, HAL.
    9. Lepage, Louis Pierre, 2020. "Endogenous learning and the persistence of employer biases in the labor market," CLEF Working Paper Series 24, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    10. Song Han, 2011. "Creditor Learning and Discrimination in Lending," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(1), pages 1-27, October.
    11. Brishti Guha & Prabal Roy Chowdhury, 2015. "Affirmative action in the presence of a creamy layer," Discussion Papers 15-06, Indian Statistical Institute, Delhi.
    12. Samuel Bowles & Glenn C. Loury & Rajiv Sethi, 2014. "Group Inequality," Journal of the European Economic Association, European Economic Association, vol. 12(1), pages 129-152, February.
    13. Lehmann, Jee-Yeon, 2011. "Job assignment and promotion under statistical discrimination: evidence from the early careers of lawyers," MPRA Paper 33466, University Library of Munich, Germany.
    14. Kevin Lang & Jee-Yeon K. Lehmann, 2012. "Racial Discrimination in the Labor Market: Theory and Empirics," Journal of Economic Literature, American Economic Association, vol. 50(4), pages 959-1006, December.
    15. J. Aislinn Bohren & Alex Imas & Michael Rosenberg, 2019. "The Dynamics of Discrimination: Theory and Evidence," American Economic Review, American Economic Association, vol. 109(10), pages 3395-3436, October.
    16. Richard Chisik, 2015. "Job market signalling, stereotype threat and counter‐stereotypical behaviour," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(1), pages 155-188, February.
    17. Guo Xu, 2015. "How Does Collective Reputation Affect Hiring? Selection and Sorting in an Online Labour Market," STICERD - Economic Organisation and Public Policy Discussion Papers Series 056, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    18. Kim, Young Chul, 2009. "Lifetime Network Externality and the Dynamics of Group Inequality," MPRA Paper 18767, University Library of Munich, Germany.
    19. David Bjerk, 2008. "Glass Ceilings or Sticky Floors? Statistical Discrimination in a Dynamic Model of Hiring and Promotion," Economic Journal, Royal Economic Society, vol. 118(530), pages 961-982, July.
    20. Guha, Brishti & Roy Chowdhury, Prabal, 2022. "Affirmative action in the presence of income heterogeneity," Games and Economic Behavior, Elsevier, vol. 132(C), pages 510-533.

    More about this item

    Keywords

    Statistical Discrimination; Collective Reputation; Reputation Trap; Forward-Looking Behavior;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J7 - Labor and Demographic Economics - - Labor Discrimination

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:54950. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.