A Political Economy of Social Discrimination

42 Pages Posted: 18 Jun 2019 Last revised: 2 May 2022

See all articles by Torun Dewan

Torun Dewan

London School of Economics & Political Science (LSE) - Department of Government

Stephane Wolton

London School of Economics & Political Science (LSE) - Department of Government

Date Written: June 1, 2019

Abstract

This paper studies the causes and consequences of social discrimination. We consider a labor market in which payoff-irrelevant identity traits serve as a focal point in hiring decisions. We show that social expectations about behavior can sustain a fully segregated labor markets in which workers with minority traits experience higher unemployment, longer unemployment spells, and lower wages and minority-owned firms are less productive than their majority counterparts. We also consider under which conditions social discrimination arises in equilibrium as the outcomes of electoral competition via the implementation of symbolic policies, such as burqa ban and minaret ban, which raises the saliency of certain social traits. We further highlight that the implementation of symbolic policies is always associated with less redistribution and lower taxation. We discuss several policy recommendations to limit the possibility of social discrimination arising.

Keywords: Unemployment, Productivity, Redistribution, Identity Politics, Populism, Burqa, Minority

JEL Classification: D70, J71, J78, J60, J64

Suggested Citation

Dewan, Torun and Wolton, Stephane, A Political Economy of Social Discrimination (June 1, 2019). Available at SSRN: https://ssrn.com/abstract=3397918 or http://dx.doi.org/10.2139/ssrn.3397918

Torun Dewan

London School of Economics & Political Science (LSE) - Department of Government ( email )

Northampton NN7 1NE
United Kingdom

Stephane Wolton (Contact Author)

London School of Economics & Political Science (LSE) - Department of Government ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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