Discrimination with Self-Selection
Posted: 12 Apr 1996
Date Written: January 1995
This paper studies the effect of employee job selection in a model of statistical discrimination in a competitive market. In an economy in which there are quality differences between groups, the conditions under which all members of one group suffer from discrimination turn out to be surprisingly strong. In general it is quite possible that for certain jobs the discrimination can favor the group that is, on average, worse qualified, while for other jobs it favors the group that is, on average, better qualified. In addition, because of the self-selection bias induced by competition, in many cases the resulting discrimination will be very small when compared to the magnitude of the underlying quality differences between groups. We also show that in cases in which the discrimination results because employers' ability to measure qualifications differs from one group to another, the conditions under which all members of one group suffer from discrimination are much weaker. In general, the group employers know least about is always favored. The economic impact of discrimination that is derived from quality differences between groups is shown to be quite different to the economic impact of discrimination that derives from differences in employer familiarity between groups. The paper concludes by considering some of the policy implications of the results.
JEL Classification: J71, J78, D83
Suggested Citation: Suggested Citation