DP9953 The Price of Prejudice
|Author(s):||Morten Hedegaard, Jean-Robert Tyran|
|Publication Date:||April 2014|
|Keyword(s):||discrimination, field experiment, labor market|
|Programme Areas:||Labour Economics, Public Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9953|
We present a new type of field experiment to investigate ethnic prejudice in the workplace. Our design allows us to study how potential discriminators respond to changes in the cost of discrimination. We find that ethnic discrimination is common but remarkably responsive to the "price of prejudice", i.e. to the opportunity cost of choosing a less productive worker on ethnic grounds. In addition, we find that the standard theory of statistical discrimination fails to explain observed choices, and that taking ethnic prejudice into account helps to predict the incidence of discrimination.