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Discrimination as Focal Point: Markets and Group Identity

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  • Kaushik Basu

Abstract

This paper presents a theory of discrimination for markets in which there are complementarities between different tasks. It is shown that, in such a setting, even when groups are a priori identical, employers will end up discriminating against certain groups. Group discrimination serves the purpose of creating a focal point in a market game. In this model, the free market, far from curbing discrimination, nurtures it, and thereby creates the need for purposive policy intervention. It is argued that with the rise of technology the problem of discrimination as focal point will get more acute and we will have to think in terms of affirmative action or a system of taxation and subsidy to support groups that get excluded.

Suggested Citation

  • Kaushik Basu, 2017. "Discrimination as Focal Point: Markets and Group Identity," Forum for Social Economics, Taylor & Francis Journals, vol. 46(2), pages 128-138, April.
    • Handle: RePEc:taf:fosoec:v:46:y:2017:i:2:p:128-138
    DOI: 10.1080/07360932.2017.1307132
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    References listed on IDEAS

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    1. Siddique, Zahra, 2008. "Caste Based Discrimination: Evidence and Policy," IZA Discussion Papers 3737, Institute of Labor Economics (IZA).
    2. Karla Hoff, 2016. "Behavioral Economics and Social Exclusion: Can Interventions Overcome Prejudice?," International Economic Association Series, in: Kaushik Basu & Joseph E. Stiglitz (ed.), Inequality and Growth: Patterns and Policy, chapter 6, pages 172-200, Palgrave Macmillan.
    3. Basu,Kaushik, 2015. "Discrimination as a coordination device : markets and the emergence of identity," Policy Research Working Paper Series 7490, The World Bank.
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    Cited by:

    1. Rategh, Yalda & Tamannaei, Mohammad & Zarei, Hamid, 2022. "A game-theoretic approach to an oligopolistic transportation market: Coopetition between incumbent systems subject to the entrance threat of an HSR service," Transportation Research Part A: Policy and Practice, Elsevier, vol. 165(C), pages 144-171.
    2. Chakravarty, Sugato & Hegde, Prasad, 2019. "The joint entrance exam, overconfident directors and firm performance," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 298-318.
    3. Mosse, David, 2018. "Caste and development: Contemporary perspectives on a structure of discrimination and advantage," World Development, Elsevier, vol. 110(C), pages 422-436.
    4. Quentin Wodon, 2017. "Social Economics, Poverty, and Human Development: Conceptual Approaches, Empirical Analysis, and Policy," Forum for Social Economics, Taylor & Francis Journals, vol. 46(2), pages 121-127, April.

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