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Discrimination as favoritism: The private benefits and social costs of in-group favoritism in an experimental labor market

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  • David L. Dickinson

    (Appalachian State University, IZA, ESI)

  • David Masclet

    (Univ Rennes, CREM, CNRS, UMR 6211, F-35000 Rennes, France)

  • Emmanuel Peterle

    (CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France)

Abstract

We examine both the private benefits and spillover costs of labor market favoritism in a unique laboratory experiment design. Group identities are first created and the data show that both employment preference rankings and wage offers favor in-group members. Workers positively reciprocate towards in-group employers by choosing higher effort in a gift exchange game. Thus, favoritism can be privately rational for employers. However, unemployed subjects are allowed to burn resources (at a cost to themselves), and we document significantly increased resource destruction when unemployment can be attributed to favoritism towards others. This highlights a significant spillover cost of favoritism that is often ignored, and it points to one possible micro-foundation of some anti-social behavior.

Suggested Citation

  • David L. Dickinson & David Masclet & Emmanuel Peterle, 2018. "Discrimination as favoritism: The private benefits and social costs of in-group favoritism in an experimental labor market," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2018-01, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  • Handle: RePEc:tut:cremwp:2018-01
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    Cited by:

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    2. Schmidt, Robert J. & Trautmann, Stefan, 2019. "Implementing (Un)fair Procedures? Favoritism and Process Fairness when Inequality is Inevitable," Other publications TiSEM 125472e2-51a2-4cf9-aab5-1, Tilburg University, School of Economics and Management.
    3. Casoria, Fortuna & Reuben, Ernesto & Rott, Christina, 2020. "The Effect of Group Identity on Hiring Decisions with Incomplete Information," IZA Discussion Papers 13873, Institute of Labor Economics (IZA).
    4. Elisabeth Tovar & Mathieu Bunel, 2019. "Profit vs morality: how unfair is labor market discrimination? Results from a survey experiment," Post-Print hal-02459378, HAL.
    5. Emanuela Ghignoni, 2017. "Who do you know or what do you know? Informal recruitment channels, family background and university enrolments," Working Papers 179, University of Rome La Sapienza, Department of Public Economics.
    6. Urs Steiner Brandt & Gert Tinggaard Svendsen, 2019. "How robust is the welfare state when facing open borders? An evolutionary game-theoretic model," Public Choice, Springer, vol. 178(1), pages 179-195, January.

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    More about this item

    Keywords

    Discrimination; Experimental Economics; Social identity; Conflicts;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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