Discrimination as social exclusion

Much discrimination works through exclusion. Poor access to public goods disadvantages minority individuals before they reach the job market. Market impediments to competition cannot explain exclusionary discrimination, and the question is, what can? This paper draws on two different nonmarket theories of discrimination, ‘discriminatory equilibrium’ and ‘stratification economics’, to address the question. In one, group cognitive biases are (re)generated by the tenor of inter-group interaction, while in the other the majority finds exclusionary discrimination remunerative given its asymmetric power. This paper models these views as different types of bad equilibria. In a couple, Pareto-improving policy interventions are possible as the problem arises from bad intra-group coordination within, respectively, the minority and the majority. Yet, in a third, the majority is in a payoff-dominant strategy game when discrimination pays off irrespective of coordination dynamics. The mitigation of discrimination in this case is more political than a policy problem.