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Government-Mandated Discriminatory Policies: Theory And Evidence

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  • Hanming Fang
  • Peter Norman

Abstract

We study an economy with private and public sectors in which workers invest in imperfectly observable skills that are important to the private sector but not to the public sector. Government regulation allows native majority workers to be employed in the public sector with positive probability while excluding the minority from it. We show that even when the public sector offers the highest wage rate, it is still possible that the discriminated group is, on average, economically more successful. The widening Chinese/Malay wage gap in Malaysia since the adoption of its New Economic Policy in 1970 supports our model. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Hanming Fang & Peter Norman, 2006. "Government-Mandated Discriminatory Policies: Theory And Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 361-389, May.
    • Handle: RePEc:ier:iecrev:v:47:y:2006:i:2:p:361-389
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    Cited by:

    1. Dahm, Matthias & Esteve-González, Patricia, 2018. "Affirmative action through extra prizes," Journal of Economic Behavior & Organization, Elsevier, vol. 153(C), pages 123-142.
    2. Sato, Hiroshi & Li, Shi, 2007. "Class Origin, Family Culture, and Intergenerational Correlation of Education in Rural China," IZA Discussion Papers 2642, Institute of Labor Economics (IZA).
    3. Jiadong Gu & Peter Norman, 2020. "A Search Model of Statistical Discrimination," Papers 2004.06645, arXiv.org, revised Apr 2020.
    4. Sergey V. Popov & Dan Bernhardt, 2012. "Fraternities and Labor-Market Outcomes," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 116-141, February.
    5. Luiz Brotherhood & Bernard Herskovic & Joao Ramos, 2022. "Income-based affirmative action in college admissions," UB School of Economics Working Papers 2022/425, University of Barcelona School of Economics.
    6. Guha, Brishti & Roy Chowdhury, Prabal, 2022. "Affirmative action in the presence of income heterogeneity," Games and Economic Behavior, Elsevier, vol. 132(C), pages 510-533.
    7. Selman Erol & Camilo Garcia-Jimeno, 2024. "Civil Liberties and Social Structure," Working Paper Series WP 2024-05, Federal Reserve Bank of Chicago.
    8. Carvalho, Jean-Paul & Koyama, Mark, 2013. "Resisting Education," MPRA Paper 48048, University Library of Munich, Germany.
    9. James P. Choy, 2024. "A theory of discriminatory institutions, with applications to apartheid and to the political economy of migration," Discussion Papers 2024-06, Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP).
    10. Fabrizio Adriani & Silvia Sonderegger, 2018. "Signaling about Norms: Socialization under Strategic Uncertainty," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(3), pages 685-716, July.
    11. Rosa, Benjamin, 2022. "Diversity versus Equity in Government Contracting," MPRA Paper 114765, University Library of Munich, Germany.
    12. Brishti Guha & Prabal Roy Chowdhury, 2015. "Affirmative action in the presence of a creamy layer," Discussion Papers 15-06, Indian Statistical Institute, Delhi.
    13. Cuberes, David & Schmillen, Achim & Teignier, Marc, 2023. "The aggregate gains of eliminating gender and ethnic gaps in the Malaysian labor market," Journal of Asian Economics, Elsevier, vol. 87(C).
    14. Sato, Hiroshi & 佐藤, 宏 & Li, Shi, 2013. "Influence Of Family Background On Current Family Wealth In Rural China," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 54(1), pages 95-117, June.
    15. Sato, Hiroshi & Li, Shi, 2007. "Revolution and Family in Rural China: Influence of Family Background on Current Family Wealth," IZA Discussion Papers 3223, Institute of Labor Economics (IZA).
    16. Guha, Brishti & Roy Chowdhury, Prabal, 2017. "Affirmative Action in the Presence of a Creamy Layer: Identity or Class Based?," MPRA Paper 78686, University Library of Munich, Germany.
    17. Joao Ramos & Bernard Herskovic, 2017. "Promoting Educational Opportunities: Long-run Implications of Affirmative Action in College Admissions," 2017 Meeting Papers 1552, Society for Economic Dynamics.

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