A Political Economy of Social Discrimination

From burqa ban to minaret ban, from right to detain suspected illegal immigrants to restricting the help to migrants, the number of social laws specifically targeting a tiny proportion of citizens has raised in recent years across Western democracies. These symbolic policies, we show, are far from being innocuous: they can have far reaching consequences for large parts of the population. By raising the salience of certain social traits (e.g., Muslim identity) these laws can create a labour market loaded in favor of the majority (e.g., the non-Muslims), yielding higher unemployment rates and spells for minority citizens. These deleterious effects arise even absent any form of bias against, or uncertainty about, minority workers. Instead they are fully driven by social expectations about behavior and are best understood as a form of social discrimination. Importantly, we establish conditions under which a plurality of the citizenry demands the implementation of symbolic policies anticipating their labor market consequences. We further highlight that the implementation of symbolic policies is always associated with less redistribution and can be coupled with lower tax rates. We discuss several policy recommendations to limit the possibility of social discrimination arising.