The Representation Dynamic and the ‘Normalization’ of Group Differences

Abstract

Intergroup inequality has been linked to differing norms of economic participation among groups (Akerlof & Kranton 2000). An outstanding question is where do these norms come from? We present a theory of endogenous identity-specific norms in which the larger a group's representation in an economic activity (e.g., college education, skilled professions), the more the activity is deemed `normal’ or `appropriate' for its members. Through this representation dynamic the economic underrepresentation of a group becomes `normalized’ and perpetuated. The result is more severe and robust inequality than in standard models. Equality of opportunity almost never results in equal outcomes, even when groups have the same productivity. Minorities and historically marginalized groups tend to be underrepresented. However, minorities with greater productivity and/or weaker group identification can become overrepresented, and even dominant, due to the same mechanisms that produce underrepresentation in the symmetric case. When there are multiple stages of participation, underrepresentation can escalate at senior levels even without `glass ceilings'. Underrepresentation disappears as economic returns rise and/or group identification weakens.

Keywords: identity, norms, education, labor force participation, inequality, underrepresentation

JEL Classification: D63, I24, J2, Z1