DP12915 Statistical Discrimination and Affirmative Action in the Lab

Author(s): Ahrash Dianat, Federico Echenique, Leeat Yariv
Publication Date: May 2018
Keyword(s): affirmative action, experiments, statistical discrimination
JEL(s): C91, D04, J71
Programme Areas: Labour Economics, Public Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12915

We present results from laboratory experiments studying the impacts of affirmative action policies. We induce statistical discrimination in simple labor-market interactions between firms and workers. We then introduce affirmative-action policies that vary in the size and duration of a subsidy firms receive for hiring discriminated-against workers. These different affirmative-action policies have nearly the same effect and practically eliminate discriminatory hiring practices. However, once lifted, few positive effects remain and discrimination reverts to its initial levels. One exception is lengthy affirmative-action policies, which exhibit somewhat longer-lived effects. Stickiness of beliefs, which we elicit, helps explain the evolution of these outcomes.