An Experimental Study of Statistical Discrimination by Employers

Abstract

This paper reports findings of an experiment motivated by a dynamic labor market model that considers the problem faced by an employer in making hiring decisions of workers of different types. The question examined here is how quickly employers learn about the ability of a group of workers through observing the performance of representatives of that group in the workplace. If prior opinions are weak, the employer will quickly update any incorrect groupbased stereotypes it may have, with information from the workplace. On the other hand, if priors are heavily weighted, incorrect initial perceptions will result in persistent differences in wages. Our experimental findings are twofold. First, subjects' (employers') behavior moves quickly toward optimal choices. Second, strong priors are hard to establish. These results suggest that it would take a long time for employers to form group-based stereotypes, and that such stereotypes should go away quickly in response to signals that contradict these stereotypes.

Sexual orientation discrimination in the Cypriot labour market. Distastes or uncertainty?

“…If employers believe that there is a systematic difference between gay male/lesbian and heterosexual employees in their reliability, aptitude, productivity, work commitment, job stability etc. then differences in employment outcomes may arise (Altonji and Pierret, 2001;Feltovich and Papageorgiou, 2004;Lahey, 2008). Specifically, if employers' uncertainty regarding sexual orientation minorities' productivity, work commitment etc.…”

“…Since, discriminatory treatments are assigned we can suggest that statistical discrimination against lesbians might be present at the initial stage of the hiring process. Working in a collaborative spirit, one may suggest that lesbians face entry employment inequalities (driven by taste and/or Van Hoye and Lievens (2003), as well as, Feltovich and Papageorgiou (2004) evaluate that given limited information, an employer is more likely to resort to negative stereotypes in order to make hiring decisions but the authors highlight the possibility that discrimination is reduced or even eliminated when a decision-maker has enough positive information. The few existing empirical studies provide contradictory outcomes.…”

“…We hypothesize that adding favourable job-related information to the applications should reduce occupational access and wage difference between sexual orientation minorities and majorities (Feltovich and Papageorgiou, 2004;Lahey, 2008;Kaas and Manger, 2011). Indeed, economic models of statistical discrimination emphasize the cognitive utility of group estimates as a means of dealing with the problems of low information and uncertainty (Arrow 1973;Altonji, and Pierret, 2001;Van Hoye and Lievens, 2003).…”

Discrimination in the Labor Market: The Curse of Competition between Workers

“…23 In a similar vein, in equilibrium (b.2) the discriminating employer should be willing to hiring the purple worker after   =   , i.e.  *  ≥ 1 3 is needed.…”

A multidisciplinary survey on discrimination analysis

“…In labor market research, Feltovich and Papageorgiou (2004) aim to investigate how quickly employers learn about the ability of a group of workers and, consequently, update their prior opinions. They design a lab experiment in which subjects (modeling employers) draw four cards (modeling new employees) from two buckets (modeling white and black groups) for a total of nine rounds, with the first six rounds having a bias of card values in favor of the "white" bucket.…”