Experience Based Discrimination

Experience Based Discrimination - Andrew Rapaport 2/10/2009...

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Andrew Rapaport 2/10/2009 Experience-Based Discrimination: Classroom Games There is little argument that certain discriminate economic behaviors may have arisen from historical and cultural factors. Such practices would be less worrisome if they tended to diminish as attitudes and laws changed, but economic theory offers the possibility that statistical discrimination may be self-reinforcing. The theory is based on an informational asymmetry between a principal and an agent. Suppose that a job applicant must decide whether to make a costly investment in skills. These skills are not perfectly observable by the employer, who relies on tests that is more likely to show a positive signal when the worker has invested. After visually observing other identifiable physical markers, such as age; race; gender; etc, the employer decides whether to hire the applicant. Due to these self-reinforcing prejudices equilibrium exists, if employers are reluctant to hire a certain type of worker based on
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Experience Based Discrimination - Andrew Rapaport 2/10/2009...

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