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Discrimination and Economic Expectations

Author

Listed:
  • William Bazley

    (University of Kansas, Lawrence, Kansas 66045)

  • Yosef Bonaparte

    (University of Colorado at Denver, Denver, Colorado 80204)

  • George Korniotis

    (Miami Herbert Business School, Coral Gables, Florida 33146)

  • Alok Kumar

    (Miami Herbert Business School, Coral Gables, Florida 33146)

Abstract

This paper examines whether perceptions of discrimination affect the economic expectations of U.S. households. We focus on two forms of expectations that play a central role in economic and financial decisions of households: labor income and inflation. Using experimental data, we demonstrate that discrimination generates greater dispersion in household forecasts. It increases subjective expectations of income uncertainty by 8% and inflation uncertainty by 5%. The impact of discrimination is concentrated among racial/ethnic minorities, inducing 12%–16% greater variation in their income uncertainty expectations and 10%–12% greater variation in their inflation uncertainty expectations. Both psychological and emotional factors appear to influence the discrimination–economic expectations relation.

Suggested Citation

  • William Bazley & Yosef Bonaparte & George Korniotis & Alok Kumar, 2024. "Discrimination and Economic Expectations," Management Science, INFORMS, vol. 70(6), pages 4115-4131, June.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:6:p:4115-4131
    DOI: 10.1287/mnsc.2022.02276
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