Discrimination as a Coordination Device: Markets and the Emergence of Identity

24 Pages Posted: 20 Apr 2016

See all articles by Kaushik Basu

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

Date Written: November 13, 2015

Abstract

The paper develops a new theory of group discrimination in which the discrimination in favor or against certain groups is simply a coordination device. It is built on the axiom that a person who gets to perform many tasks is more effective in carrying out each task, which implies increasing returns to productivity in doing the same task or strategic complementarity between doing different tasks. The theory helps us understand discrimination in free markets and the .finding of some empirical studies that show that people discriminate in job markets against certain groups even when all other traits are held constant. The model gives insight into the relation between group size, discrimination, and productivity.

Keywords: Labor Markets, Employment and Shared Growth, Achieving Shared Growth, Equity and Development, Rural Labor Markets, Pro-Poor Growth

Suggested Citation

Basu, Kaushik, Discrimination as a Coordination Device: Markets and the Emergence of Identity (November 13, 2015). World Bank Policy Research Working Paper No. 7490. Available at SSRN: https://ssrn.com/abstract=2690629

Kaushik Basu (Contact Author)

Cornell University - Department of Economics ( email )

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IZA Institute of Labor Economics

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Brookings Institution ( email )

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