19.discrimination2 - LECTURE 19 DISCRIMINATION 2...

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LECTURE 19 DISCRIMINATION 2
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ANNOUNCEMENTS Problem Set 4 due Today Midterm 2 Next Thursday (11/4) Midterm review sheet posted Office hours: Wed. 1-3p Today Statistical Discrimination Empirical evidence
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STATISTICAL DISCRIMINATION Taste for Discrimination – blatant preference to hire, work with or buy products/services from a particular group Statistical Discrimination Profit-maximizing firms – Colorblind Want to hire best candidate Firms have imperfect information about potential employees
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EXAMPLE University of Illinois is considering two individuals for a faculty position From resume and references: Both graduated from top programs Both published in top journals Both have excellent teaching evaluations Interview – Both would love to work here In this case it is true, but the truth is private information So who do hire?
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ADDITIONAL INFORMATION Hiring new faculty is very costly to the University b important to keep turnover rates low From interview: Candidate 1 is from Springfield, IL Candidate 2 if from Los Angeles, CA
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HOW STATISTICAL DISCRIMINATION WORKS Use statistics about behavior of a group – race, religion, gender, etc. – to draw conclusions about expected behavior of an individual **Based on observable facts and profit motive, not individual taste for or unsubstantiated beliefs about a particular group**
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STATISTICAL DISCRIMINATION IN OUR EXAMPLE Additional information: Of the past 6 hires – 3 were from MW, 3 from Coast Retention– 3 from MW, 1 from Coast Average group behavior: Hires from MW stay for sure Hires from the coasts only with 1/3 probability on average
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WHAT IS A PROFIT-MAX UNIVERSITY TO DO? Assume
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This note was uploaded on 01/19/2011 for the course ECON ECON 440 taught by Professor Kristinebrown during the Fall '10 term at University of Illinois at Urbana–Champaign.

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19.discrimination2 - LECTURE 19 DISCRIMINATION 2...

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