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Statistical Discrimination and Efficiency

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  • Peter Norman

Abstract

This paper asks whether statistical discrimination is a market failure. I consider the problem for a utilitarian social planner who operates in an environment that can generate statistical discrimination as an equilibrium phenomenon. It is found that there are potential efficiency gains from discrimination in terms of reduced "mismatch" between workers and jobs. Whether the solution to the planning problem involves discrimination depends on the trade-off between the informational gains of specialization and the losses in terms of increased investment costs. Copyright 2003, Wiley-Blackwell.

Suggested Citation

  • Peter Norman, 2003. "Statistical Discrimination and Efficiency," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 615-627.
    • Handle: RePEc:oup:restud:v:70:y:2003:i:3:p:615-627
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00258
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    Citations

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    Cited by:

    1. Fang, Hanming & Norman, Peter, 2001. "Government-Mandated Discriminatory Policies," Working Paper Series 562, Research Institute of Industrial Economics.
    2. Andrea Moro & Peter Norman, 2019. "Endogenous Comparative Advantage," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1088-1124, July.
    3. 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.
    4. Bøg, Martin & Kranendonk, Erik, 2011. "Labor market discrimination of minorities? yes, but not in job offers," MPRA Paper 33332, University Library of Munich, Germany.
    5. Schwager, Robert, 2012. "Grade inflation, social background, and labour market matching," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 56-66.
    6. Lommerud, K.E. & Vagstad, S., 2000. "Mommy Tracks and Public Policy: On Self-Fulfilling Prophecies and Gender Gaps in Promotion," Norway; Department of Economics, University of Bergen 0600, Department of Economics, University of Bergen.
    7. Aaron Hedlund, 2014. "Estate Taxation and Human Capital with Information Externalities," Working Papers 1415, Department of Economics, University of Missouri.
    8. Hanming Fang, 2001. "Social Culture and Economic Performance," American Economic Review, American Economic Association, vol. 91(4), pages 924-937, September.
    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. Raymond Fisman & Daniel Paravisini & Vikrant Vig, 2017. "Cultural Proximity and Loan Outcomes," American Economic Review, American Economic Association, vol. 107(2), pages 457-492, February.
    11. Yeon-Koo Che & Kyungmin Kim & Weijie Zhong, 2020. "Statistical Discrimination in Ratings-Guided Markets," Papers 2004.11531, arXiv.org, revised Nov 2024.
    12. Lommerud, Kjell Erik & Straume, Odd Rune & Vagstad, Steinar, 2015. "Mommy tracks and public policy: On self-fulfilling prophecies and gender gaps in hiring and promotion," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 540-554.
    13. David Comerford & Jose V Rodriguez Mora & Michael J Watts, 2017. "The rise of meritocracy and the inheritance of advantage," Working Papers 1716, University of Strathclyde Business School, Department of Economics.
    14. David Comerford & José V. Rodríguez Mora & Michael J. Watts, 2022. "Meritocracy and the inheritance of advantage," Journal of Economic Growth, Springer, vol. 27(2), pages 235-272, June.
    15. Shubham Chaudhuri & Rajiv Sethi, 2003. "Statistical Discrimination with Neighborhood Effects: Can Integration Eliminate Negative Stereotypes?," Game Theory and Information 0312001, University Library of Munich, Germany.
    16. Pfeifer, Christian & Sohr, Tatjana, 2008. "Analysing the Gender Wage Gap Using Personnel Records of a Large German Company," IZA Discussion Papers 3533, Institute of Labor Economics (IZA).
    17. Dragos BIGU, 2009. "Discrimination and Profit," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(5), pages 1021-1027, December.
    18. Kim, Young Chul & Loury, Glenn, 2009. "Group Reputation and the Dynamics of Statistical Discrimination," MPRA Paper 18765, University Library of Munich, Germany.
    19. Köllő, János & Boza, István & Ilyés, Virág & Kőműves, Zsófia & Mark, Lili Katalin, 2023. "How Do Firms Deal with the Risks of Employing Ex-prisoners?," IZA Discussion Papers 16645, Institute of Labor Economics (IZA).
    20. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2004. "The Economics of Discrimination: Equity, Equality and Diversity in the New European Constitution," EEAG Report on the European Economy, CESifo, vol. 0, pages 84-95, October.
    21. Nicola Persico, 2002. "Racial Profiling, Fairness, and Effectiveness of Policing," American Economic Review, American Economic Association, vol. 92(5), pages 1472-1497, December.

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