Loss Aversion in Taste-Based Employee Discrimination: Evidence from a Choice Experiment

17 Pages Posted: 12 Jun 2021 Last revised: 26 Jan 2023

See all articles by Louis Lippens

Louis Lippens

Ghent University

Stijn Baert

Ghent University; University of Antwerp; Catholic University of Louvain (UCL); Institute for the Study of Labor (IZA)

Eva Derous

Erasmus University Rotterdam

Abstract

Using a choice experiment, we test whether taste-based employee discrimination against ethnic minorities is susceptible to loss aversion. In line with empirical evidence from previous research, our results indicate that introducing a hypothetical wage penalty for discriminatory choice behaviour lowers discrimination and that higher penalties have a greater effect. Most notably, we find that the propensity to discriminate is significantly lower when this penalty is loss-framed rather than gain-framed. From a policy perspective, it could therefore be more effective to financially penalise taste-based discriminators than to incentivise them not to discriminate.

Keywords: ethnicity, loss aversion, employee discrimination, taste-based discrimination

JEL Classification: J70, J24, J60, C92

Suggested Citation

Lippens, Louis and Baert, Stijn and Derous, Eva, Loss Aversion in Taste-Based Employee Discrimination: Evidence from a Choice Experiment. IZA Discussion Paper No. 14438, Available at SSRN: https://ssrn.com/abstract=3865463 or http://dx.doi.org/10.2139/ssrn.3865463

Louis Lippens (Contact Author)

Ghent University

Coupure Links 653
Ghent, 9000
Belgium

Stijn Baert

Ghent University ( email )

University of Antwerp ( email )

Prinsstraat 13
Antwerp, 2000
Belgium

HOME PAGE: http://https://www.uantwerpen.be/nl/personeel/stijn-baert/

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

HOME PAGE: http://https://www.uclouvain.be/en-309318.html

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=6832

Eva Derous

Erasmus University Rotterdam ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands
+31 10 408 9588 (Phone)
+31 10 408 9009 (Fax)

HOME PAGE: http://www.eur.nl/fsw/psyweb/homepage/eva_derous.htm

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