Year: 2019
Type: report
Abstract: Discrimination has been widely studied in the social sciences. Economists often categorize the source of discrimination as either taste-based or statistical—a valuable distinction for policy design and welfare analysis. In this paper, we highlight that in many situations economic agents may have inaccurate beliefs, and demonstrate that the possibility of inaccurate statistical discrimination generates an identification problem for attempts to isolate the source of differential treatment. We introduce isodiscrimination curves —which represent the set of preferences and beliefs that generate the same level of discrimination—to formally outline the identification problem: when not accounted for, inaccurate statistical discrimination can be mistaken for taste-based discrimination, accurate statistical discrimination, or their combination. A review of the empirical discrimination literature in economics, spanning 1990-2018, reveals the scope of this issue. While most papers discuss and attempt to distinguish between taste and statistical discrimination, a small minority—fewer than 7%—consider inaccurate beliefs in the analysis. An experiment illustrates a methodology for differentiating between the three sources of discrimination, demonstrating the pitfalls of the identification problem while presenting a portable solution.
DOI: 10.3386/w25935
Institutions: University of Southern California, The University of Sydney, National Bureau of Economic Research, Harvard University, University of California, Los Angeles, The University of Melbourne, University of Chicago, University of Virginia, Carnegie Mellon University, University of Pennsylvania, Stanford University
Language: English
Subfield: Sociology and Political Science
Field: Social Sciences
Domain: Social Sciences
SDG: Reduced inequalities
Open Access status: green
OpenAlex ID: W3044759643