Discrimination and Workers' Expectations

Abstract

The paper explores the role of workers’ expectations as an original explanation for thepuzzling long run persistence of observed discrimination against some minorities in the labormarket. A game of incomplete information is presented, showing that ex ante identical groupsof workers may be characterized by unequal outcomes in equilibrium due to their differentbeliefs, even though discriminatory tastes and statistical discrimination by employers havedisappeared. Wrong beliefs of being discriminated against are self-confirming in thiscircumstance, being the ultimate cause of a lower percentage of promotions which supportsthese wrong beliefs.

Keywords: discrimination, workers’ expectations, self-confirming beliefs

JEL Classification: J71, J15, J24, D84, C79