Statistical discrimination in a competitive labor market by Jonathan B. Berk

Cover of: Statistical discrimination in a competitive labor market | Jonathan B. Berk

Published by National Bureau of Economic Research in Cambridge, MA .

Written in English

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  • Discrimination in employment -- Econometric models.

Edition Notes

Book details

StatementJonathan B. Berk.
SeriesNBER working paper series -- working paper 6871, Working paper series (National Bureau of Economic Research) -- working paper no. 6871.
ContributionsNational Bureau of Economic Research.
LC ClassificationsHB1 .W654 no. 6871
The Physical Object
Pagination46 p. :
Number of Pages46
ID Numbers
Open LibraryOL22400628M

Download Statistical discrimination in a competitive labor market

This paper studies the effect of employee job selection in a model of statistical discrimination in a competitive labor market. In an economy in which there are quality differences between groups, a surprisingly strong condition is required to guarantee discrimination against the worse qualified group MLRP must by: 3.

Get this from a library. Statistical discrimination in a competitive labor market. [Jonathan B Berk; National Bureau of Economic Research.]. test). Several types of economic discrimination with-in the context of competitive market assumptions are examined by means of several models, anid the empirical plausibility anad implications of these models are discussed.

The authors conclude that the statistical theories are unlikely to provide an important explanation of labor market. On the presumption that more information improves economic decision-making, it is often claimed that statistical discrimination reduces inefficiencies. Outlawing discrimination then means foregone efficiency gains.

This paper examines whether there is indeed an uncomfortable trade-off between equality and efficiency, by reconsidering some of the most significant statistical-discrimination Cited by: 6.

This paper derives a statistical discrimination model that includes the self selection that results when employees optimally choose which jobs to apply for. We show that in such a model important theoretical results in the statistical discrimination literature are overturned. Statistical discrimination is a theory of inequality between demographic groups based on stereotypes that do not arise from prejudice or racial and gender bias.

using the available information. In equilibrium, if the labour market is competitive and all employers share the same type of information, workers are paid according to their.

Second, statistical discrimination is very relevant to labor markets, highlighted by the many existing empirical studies of statistical discrimination that examine labor markets. Finally, the use of labor market context in a competitive double-auction market environment is a logical context with precedence in the experimental economics.

Downloadable. Statistical discrimination occurs when distinctions between demographic groups are made on the basis of real or imagined statistical distinctions between the groups.

While such discrimination is legal in some cases (e.g., insurance markets), it is illegal and/or controversial in others (e.g., racial profiling and gender-based labor market discrimination). F.D. Blau, in International Encyclopedia of the Social & Behavioral Sciences, Models of Labor Market Discrimination.

Theoretical work in this area was initiated by Becker's () model of racial conceptualized discrimination as a taste and analyzed three cases, those in which the discriminatory tastes were held by employers, co-workers, and customers or clients.

Statistical discrimination is an economic theory that attempts to explain racial and gender inequality. The theory attempts to explain the existence and endurance of racial profiling and gender-based discrimination in the labor market even in the absence of overt prejudice on the part of the economic actors involved.

The pioneering of statistical discrimination theory is attributed to. Statistical Discrimination Most economic analyses of discrimination since Phelps () and Arrow () have focused on the statistical theory of discrimination, rather than taste-based discrimination. The premise of the statistical discrimination literature is that firms have limited information about the skills of job applicants.

Statistical Discrimination in Labor Markets: An Experimental Analysis* Statistical discrimination occurs when distinctions between demographic groups are made on the basis of real or imagined statistical distinctions between the groups.

While such discrimination is legal in some cases (e.g., insurance markets), it is illegal and/or. We review theories of race discrimination in the labor market.

Taste-based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread, but no existing.

Statistical discrimination is a theorized behavior in which racial or gender inequality results when economic agents (consumers, workers, employers, etc.) have imperfect information about individuals they interact with.

According to this theory, inequality may exist and persist between demographic groups even when economic agents are rational and non-prejudiced. - Many examples outside the labour market, e.g. in the insurance market. 10 - 18 Statistical discrimination ctd.

• A simple model of the impact of statistical discrimination on wages: White and black applicants have their individual test scoresT. - If the Ts are perfectly correlated with people’s productivity, people. takers. In such a situation, the labor market would be perfectly competitive, and gender wage discrimination would not be possible.

Empirically, how strong employers’ monopsony power is, boils down to the question of how sensitively workers’ labor supply to a single employer reacts to a change in the wage offered by this employer.

An enormous literature, starting with Becker™s book The Economics of Discrimination, explores (you guessed it!) the economics of discrimination. Economic models of discrimination can be divided into two classes: competitive and collective models. Competitive models study individual maximizing behavior that may include discrimination.

tray the labor market as divided neatly between employers with a “taste for discrimination ” and those who are indifferent to race (Becker ). Consequently, it is suggested, job seekers can avoid discrimination by sorting themselves into sectors of the labor market where discrimination is less likely to occur (Heckman ).

In the first paper, I determine the potential causes of persistent labor market inequality by developing a dynamic model of statistical discrimination in a competitive environment. In this dynamic model, the forward-looking behavior of economic agents determines the dynamic paths to the steady states.

When employers think certain groups have different characteristics related to their productivity, statistical discrimination may occur. Consequently, workers might be segregated based on gender and race. Primary and secondary jobs.

Peter Doeringer and Michael Piore [] established the dual labor market. Efforts to build theories describing what enables discrimination have outstripped efforts to empirically test those theories—an issue Product Market Structure and Labor Market Discrimination seeks to address.

The book’s editors, John S. Heywood and James H. Peoples, present eight separate studies that look at the various ways in which the.

Contrary to what many economists argue is the cause of racial and gender wage divides—a so-called skills gap between White men workers and their otherwise-similar peers—Annelies Goger and Luther Jackson write for The Brookings Institution that policymakers instead should focus on an opportunity gap in the U.S.

labor market. The skills gap. w = (w = w b)/w b = the coefficient of market discrimination, or the proportionate gap between the wages of White and Black workers that prevails in the marketplace.

Model Becker’s Model of Employer Discrimination (a) The product and labor markets are perfectly competitive. (b) The working population, N,) supplies its labor inelastically. Empirical work on statistical discrimination is hampered by the difficulty of obtaining suitable data from naturally-occurring markets.

This paper reports results from controlled laboratory experiments designed to study second-moment statistical discrimination in a labor market setting.

As the labor market reacts to a par-ticular shock, wages and employment will tend to move toward their new equilibrium level. Efficiency Figure also shows the benefits that accrue to the national economy as workers and firms trade with each other in the labor market. In a competitive market, E * workers are employed at a wage of w *.

The. Explain how the introduction of a union will affect total employment under each of the following conditions: a perfectly competitive labor market with all firms becoming unionized, a perfectly competitive labor market with some but not all firms becoming unionized, and a monopsony market.

Bureau of Labor Statistics. Can competitive product markets reduce workplace discrimination. Product Market Structure and Labor Market Discrimination. Edited by John S. Heywood and James H. Peoples.

Albany, NY: State University of New York Press,pp., $ paperback. Scholars of labor economics have spent a significant amount of. - Department of Labour (), Labour Market StatisticsWellington. - Statistics New Zealand (), Human Capital Statistics, Wellington.

10 - 4 The Discrimination Coefficient Gary Becker’s neoclassical ‘ taste discrimination model ’. Discrimination involves acting on the belief that members of a certain group are inferior solely because of a factor such as race, gender, or religion.

There are many types of discrimination but the focus here will be on discrimination in labor markets, which arises if workers with the same skill levels—as measured by education, experience, and expertise—receive different pay receive.

Educational policies and labour reforms might need to be eval-uated within a context in which statistical discrimination and employer learning considerations are present.

It is widely acknowledged that a labour market with these characteristics will not resemble the standard text-book competitive model which is used to foresee the impact of numer. There is credible evidence that obese people face discrimination in the labor market, either taste-based or statistical discrimination.

The dynamic effects of obesity may matter for labor market outcomes. In a competitive market, with freedom of market entry, employers who discriminate and face higher production costs will be driven out of. Aigner and Cain () have argued that statistical discrimination is not "really" discrimination against a race or sex group.

They posit that racial and sexual discrimination should be defined to require that the average pay of women and blacks is less than the average productivities that group members bring to the labor market.

They argue. In the s, few economists thought of phenomena such as racial discrimination as under their purview. That changed inwhen Gary S. Becker, Professor of Economics and of Sociology at the University of Chicago and at Chicago Booth before his death inpublished The Economics of Discrimination, a book based on his PhD thesis.

Becker’s analysis would extend the reach of. Sattinger, Michael. Statistical Discrimination with Employment Criteria. International Economic Review – Swinton, David H.

Racial Discrimination: A Labor Force Competition Theory of Discrimination in the Labor Market. American Economic Review – See also: How to Write a Research Paper; Research Paper Topics. We provide a test for statistical discrimination or "rational" stereotyping in environments in which agents learn over time.

Our application is to the labor market. If profit maximizing firms have limited information about the general productivity of new workers, they may choose to use easily observable characteristics such as years of education to "statistically discriminate" among workers.

Statistical and taste-based discrimination. The first studies investigating ethnic discrimination in the labor market consisted of audits made in the USA, where people from different ethnic groups (White, Hispanics, and Afro-Americans) were asked to apply for job offers and to attend job interviews (Newman ; McIntyre et al.

; Heckman and Siegelman ; Heckman, ; Altonji and Blank. I’m a fan of Tim Harford’s Logic of Life, and I’m a big promoter of the explanatory power of statistical discrimination (see here, here, and here for starters; also check out my lecture notes).So naturally I’m thrilled that Tim’s new book devotes a full chapter to statistical discrimination – or as he prefers to call it, “rational racism.”.

Types of discrimination are usually distinguished by economic theory in statistical and taste-based. Using a correspondence experiment, we analyze which of the two affects Italian labor market the most.

In this respect, we studied the difference in discrimination reserved to first- and second-generation immigrants, taking gender differences into account. Earnings, Performance, and Nationality Discrimination in a Highly Competitive Labor Market as An Analysis of the English Professional Soccer League Roberto Pedace Journal of Sports Economics 9:.

Gender wage discrimination occurs when employers pay women lower wages than identically qualified male workers. Whether such employers are acting on their own preferences or those of their firm’s owners, managers, employees, or customers, the unequal treatment of women violates norms of equity and considerations of market efficiency and is the subject of policy research and debate in most.

In a competitive labor market where all employers share the same type of informa-tion, workers are paid the expected productivity conditional on the value of the signal. 2 Theories of Statistical Discrimination and Affirmative Action: A Survey.It depends on what the going wage rate is in the labor market.

c. $80 d. There is insufficient information to answer the question. The decision rule for a profit-maximizing firm operating in a competitive market to hire an additional worker is the value of the: c. Employers engaging in statistical discrimination are willing to forego.

Perhaps labor unions are to blame; perhaps the real culprit is the extensive federal regulation of the employment market, including minimum-wage and maximum-hour laws and unemployment compensation.

If competitive markets drive out discrimination, the problem for current federal policy lies not in the absence of aggressive anti-discrimination.

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