IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/18765.html
   My bibliography  Save this paper

Group Reputation and the Dynamics of Statistical Discrimination

Author

Listed:
  • Kim, Young Chul
  • Loury, Glenn

Abstract

Previous literature on statistical discrimination explained stereotypes based on the existence of multiple equilibria, in which principals have different self-confirming beliefs about different social groups (Arrow, 1973; Coate and Loury, 1993). However, the literature has not provided an account of where the principals' prior beliefs come from. Moreover, the static models dominating the literature do not offer relevant information about the dynamic paths that lead to each equilibrium. This paper develops a dynamic version of statistical discrimination in which economic players' forward-looking behaviors determine the dynamic paths to each equilibrium. Defining ``Group Reputation'' as the objective information shared by principals regarding the average characteristics of agents belonging to each group, this study identifies groups as advantaged or disadvantaged, based on their initial reputation states, and provides conditions by which a group can switch from one reputation state to another. By understanding this dynamic structure of reputation evolution, we examine the strategy that well-coordinated principals may voluntarily utilize to maximize their profits, helping the group in the reputation trap to improve its skill investment rate.

Suggested Citation

  • Kim, Young Chul & Loury, Glenn, 2009. "Group Reputation and the Dynamics of Statistical Discrimination," MPRA Paper 18765, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:18765
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/18765/1/MPRA_paper_18765.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Adsera, Alicia & Ray, Debraj, 1998. "History and Coordination Failure," Journal of Economic Growth, Springer, vol. 3(3), pages 267-276, September.
    2. David Card & Alexandre Mas & Jesse Rothstein, 2008. "Tipping and the Dynamics of Segregation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(1), pages 177-218.
    3. O'Flaherty, Brendan & Sethi, Rajiv, 2008. "Racial stereotypes and robbery," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 511-524, December.
    4. 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.
    5. Lawrence E. Blume, 2006. "The Dynamics of Statistical Discrimination," Economic Journal, Royal Economic Society, vol. 116(515), pages 480-498, November.
    6. Roland G. Fryer Jr. & Glenn C. Loury, 2005. "Affirmative Action and Its Mythology," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 147-162, Summer.
    7. Moro, Andrea & Norman, Peter, 2004. "A general equilibrium model of statistical discrimination," Journal of Economic Theory, Elsevier, vol. 114(1), pages 1-30, January.
    8. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 651-667.
    9. Levin Jonathan, 2009. "The Dynamics of Collective Reputation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, August.
    10. Schwab, Stewart, 1986. "Is Statistical Discrimination Efficient?," American Economic Review, American Economic Association, vol. 76(1), pages 228-234, March.
    11. Peter Norman, 2003. "Statistical Discrimination and Efficiency," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 615-627.
    12. Samuel Bowles & Glenn C. Loury & Rajiv Sethi, 2014. "Group Inequality," Journal of the European Economic Association, European Economic Association, vol. 12(1), pages 129-152, February.
    13. Roland Fryer & Glenn C. Loury & Tolga Yuret, 2003. "Color-Blind Affirmative Action," NBER Working Papers 10103, National Bureau of Economic Research, Inc.
    14. Kim, Young Chul, 2009. "Lifetime Network Externality and the Dynamics of Group Inequality," MPRA Paper 18767, University Library of Munich, Germany.
    15. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    16. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Yuki, Kazuhiro, 2012. "Stereotypes, segregation, and ethnic inequality," MPRA Paper 39704, University Library of Munich, Germany.
    3. Kevin Lang & Jee-Yeon K. Lehmann, 2012. "Racial Discrimination in the Labor Market: Theory and Empirics," Journal of Economic Literature, American Economic Association, vol. 50(4), pages 959-1006, December.
    4. Juan Camilo Cárdenas & Hugo Ñopo & Jorge Luis Castañeda, 2012. "Equidad en la Diferencia: Políticas para la Movilidad Social de Grupos de Identidad. Misión de Movilidad Social y Equidad," Documentos CEDE 10319, Universidad de los Andes, Facultad de Economía, CEDE.
    5. Kim, Young Chul, 2009. "Lifetime Network Externality and the Dynamics of Group Inequality," MPRA Paper 18767, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kim, Young Chul, 2009. "Lifetime Network Externality and the Dynamics of Group Inequality," MPRA Paper 18767, University Library of Munich, Germany.
    2. Kim, Young-Chul & Loury, Glenn, 2012. "Collective Reputation and the Dynamics of Statistical Discrimination," MPRA Paper 54950, University Library of Munich, Germany, revised 31 Mar 2014.
    3. 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.
    4. Samuel Bowles & Glenn C. Loury & Rajiv Sethi, 2014. "Group Inequality," Journal of the European Economic Association, European Economic Association, vol. 12(1), pages 129-152, February.
    5. 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.
    6. Kim, Young Chul, 2009. "Group Reputation and the Endogenous Group Formation," MPRA Paper 18575, University Library of Munich, Germany.
    7. Guo Xu, 2015. "How Does Collective Reputation Affect Hiring? Selection and Sorting in an Online Labour Market," STICERD - Economic Organisation and Public Policy Discussion Papers Series 056, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    8. repec:hal:spmain:info:hdl:2441/7hhel11bit99d9nrdl3gjukcv5 is not listed on IDEAS
    9. Lommerud, Kjell Erik & Vagstad, Steinar, 2000. "Mommy Tracks and Public Policy: On Self-Fulfilling Prophecies and Gender Gaps in Promotion," CEPR Discussion Papers 2378, C.E.P.R. Discussion Papers.
    10. O'Flaherty, Brendan & Sethi, Rajiv, 2008. "Racial stereotypes and robbery," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 511-524, December.
    11. repec:cep:stieop:56 is not listed on IDEAS
    12. Yuki, Kazuhiro, 2012. "Stereotypes, segregation, and ethnic inequality," MPRA Paper 39704, University Library of Munich, Germany.
    13. Dennis Epple & Richard Romano & Holger Sieg, 2008. "Diversity and Affirmative Action in Higher Education," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(4), pages 475-501, August.
    14. repec:spo:wpmain:info:hdl:2441/7hhel11bit99d9nrdl3gjukcv5 is not listed on IDEAS
    15. Mialon, Sue H. & Yoo, Seung Han, 2017. "Incentives for discrimination," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 141-160.
    16. Lily Hu & Yiling Chen, 2017. "A Short-term Intervention for Long-term Fairness in the Labor Market," Papers 1712.00064, arXiv.org, revised Feb 2018.
    17. Pierre Fleckinger & Matthieu Glachant & Gabrielle Moineville, 2017. "Incentives for Quality in Friendly and Hostile Informational Environments," American Economic Journal: Microeconomics, American Economic Association, vol. 9(1), pages 242-274, February.
    18. Fang, Hanming & Norman, Peter, 2001. "Government-Mandated Discriminatory Policies," Working Paper Series 562, Research Institute of Industrial Economics.
    19. Song Han, 2011. "Creditor Learning and Discrimination in Lending," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(1), pages 1-27, October.
    20. Sáez-Martı´, Maria & Zenou, Yves, 2012. "Cultural transmission and discrimination," Journal of Urban Economics, Elsevier, vol. 72(2), pages 137-146.
    21. 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.
    22. Stéphane Carcillo & Etienne Wasmer, 2003. "Bilateral Worker-Firm Training Decisions and an Application to Discrimination," SciencePo Working papers hal-01018171, HAL.
    23. Seung Han Yoo, 2013. "A Theory of Group Inequality," Discussion Paper Series 1309, Institute of Economic Research, Korea University.

    More about this item

    Keywords

    Statistical Discrimination; Group Reputation; Reputation Trap; Forward-Looking Behavior;
    All these keywords.

    JEL classification:

    • H0 - Public Economics - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:18765. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.