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A Theory of Group Inequality

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  • Seung Han Yoo

    (Department of Economics, Korea University, Seoul, Republic of Korea)

Abstract

This paper offers a model in which there is direct competition between different groups. We deliberately endow an environment with many employers and workers in which opportunities are limited such that each employer is randomly matched with two workers from the entire worker population, which consists of two ex ante identical sub-groups, and selects at most one of them. We show that with the competition, a set of feasible equilibria has a con.ict structure unlike the conflict-free structure found in typical statistical discrimination models, and that we can find employers' strategy such that employers benefit from discrimination, and this strategy can be sustained as a collusion between employers and an advantaged group in a repeated game.

Suggested Citation

  • Seung Han Yoo, 2013. "A Theory of Group Inequality," Discussion Paper Series 1309, Institute of Economic Research, Korea University.
    • Handle: RePEc:iek:wpaper:1309
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w1309.pdf
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    References listed on IDEAS

    as
    1. Lawrence E. Blume, 2005. "Learning and Statistical Discrimination," American Economic Review, American Economic Association, vol. 95(2), pages 118-121, May.
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    3. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
    4. Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," American Economic Review, American Economic Association, vol. 95(4), pages 1327-1340, September.
    5. Shubham Chaudhuri & Rajiv Sethi, 2008. "Statistical Discrimination with Peer Effects: Can Integration Eliminate Negative Stereotypes?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(2), pages 579-596.
    6. Moro, Andrea & Norman, Peter, 2004. "A general equilibrium model of statistical discrimination," Journal of Economic Theory, Elsevier, vol. 114(1), pages 1-30, January.
    7. Larry Samuelson & George J. Mailath & Avner Shaked, 2000. "Endogenous Inequality in Integrated Labor Markets with Two-Sided Search," American Economic Review, American Economic Association, vol. 90(1), pages 46-72, March.
    8. Drew Fudenberg & David M. Kreps & Eric S. Maskin, 1990. "Repeated Games with Long-run and Short-run Players," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(4), pages 555-573.
    9. Stiglitz, Joseph E, 1973. "Approaches to the Economics of Discrimination," American Economic Review, American Economic Association, vol. 63(2), pages 287-295, May.
    10. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Statistical discrimination; Group inequality; Asymmetric information;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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