We study ingroup bias-the preferential treatment of members of one's group-in naturally occurring data, where economically signi…cant allocation decisions are made under a strong non-discriminatory norm. Data come from Israeli small claims courts during 2000-04, where the assignment of a case to an Arab or Jewish judge is essentially random. We …nd robust evidence for judicial ingroup bias. Furthermore, this bias increases with terrorism intensity in the vicinity of the court in the year preceding the ruling. The results are consistent with theory and lab evidence according to which salience of group membership enhances social identi…cation.

Since the outbreak of the Intifada in September 2000, the Israeli government has extensively employed a policy of assassinating members of Palestinian terrorist organizations. Theoretically, the net effect of an assassination on future terrorism is indeterminate because it embodies two conflicting effects: the assassination of a terrorist hurts his organization's capabilities, but may increase the motivation for future attacks. Our indirect, empirical evaluation of the effectiveness of assassinations for Isreali counterterrorism is based on Israeli stock market reactions to news of such operations. We rely on the fact that terrorism has had significant adverse effects on the Israeli economy and claim that the stock market should react positively to news about effective counterterrorism measures but negatively to news about counterproductive ones. We find that the market does not react to assassinations of low-ranked members of Palestinian terrorist organizations. The market does react strongly, however, to the assassinations of senior leaders of terrorist organizations: it declines following assassinations targeting senior political leaders but rises following assassinations of senior military leaders. To the extent that these reactions reflect expectations regarding future levels of terrorism they imply that the market perceives the first type of assassinations as counterproductive, but the second as an effective measure in combating terrorism.

Using a combination of randomised field experiments, follow-up telephone surveys and other data collection efforts, this article studies the extent and the sources of ethnic discrimination in the Israeli online market for used cars. We find robust evidence of discrimination against Arab buyers and sellers which, the analysis suggests, is motivated by 'statistical' rather than 'taste' considerations. We additionally find that Arab sellers manipulate their ethnic identity in the market by leaving the name field in their advertisements blank.The study of discrimination against minorities in the marketplace has received great deal of attention by economists in recent decades. There are two leading explanations for discriminatory behaviour in markets. The first, introduced in the seminal contribution of Becker (1957), focuses on 'taste-based discrimination', or personal prejudice, of economic agents who dislike associating with individuals of a given gender, race or ethnicity. In Becker's model the strength of an agent's aversion to cross-group contact is expressed as the price the agent would demand to compensate her or him for such interactions. Thus, for example, a prejudiced white employer would hire a black worker only if this worker receives a sufficiently lower wage than an equally productive white worker.The second leading theory of discrimination, due to Arrow (1972Arrow ( , 1973 and Phelps (1972), focuses on 'statistical discrimination'. According to this theory discriminatory behaviour is the result of (actual or perceived) differences across groups in aggregate characteristics. The decision-maker uses these differences to evaluate some outcome-relevant individual characteristics, which are not easily observable. Thus, for instance, a non-prejudiced employer facing two job applicants, one black and one white will prefer to hire the white applicant if he or she believes that white workers are on average more productive than black workers.

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Grade inflation and high grade levels have been subjects of concern and public debate in recent decades. In the mid-1990s, Cornell University's Faculty Senate had a number of discussions about grade inflation and what might be done about it. In April 1996, the Faculty Senate voted to adopt a new grade reporting policy which had two parts: 1) the publication of course median grades on the Internet; and 2) the reporting of course median grades in students' transcripts. The policy change followed the determination of a university committee that "it is desirable for Cornell University to provide more information to the reader of a transcript and produce more meaningful letter grades." It was hoped that "More accurate recognition of performance may encourage students to take courses in which the median grade is relatively low." The median grade policy has remained to date only partially implemented: median grades have been reported online since 1998 but do not yet appear in transcripts. We evaluate the effect of the implemented policy on patterns of course choice and grade inflation. Specifically, we test two related hypotheses: First, all else being equal, the availability of online grade information will lead to increased enrollment into leniently graded courses. Second, high-ability students will be less attracted to the leniently graded courses than their peers. Building on these results we perform an exercise that identifies the extent to which the change in student behavior resulted in an increase in the university-wide mean grade.