Unlevel Playing Fields: Chapter 5

Discrimination: Different treatment of equally productive people according to group membership

Outcomes of discrimination:
i) wage inequality and higher prices
ii) underemployment/unemployment
iii) crowding

Explanations:

Becker -- taste for discrimination

Consumers - bald newscasters
Employers - hire friends
Employees - won't work with others

Why taste?

Transaction Costs: time or money spent trying to identify the price, quality or location of commodities, employers or employees

=> Statistical Discrimination: applying group information to an individual member of that group

Two sources:
1) One group less productive on average
2) less is known about one group

Discrimination due to tastes => inefficient (discriminator pays)

Statistical discrimination => efficient (employers profit)

Answer:

Market breaks down discrimination:
i) competitive markets rewards consumers, employers and employees with no `taste' for discrimination'
ii) markets reward employers who find ways to circumvent statistical discrimination

role of: bankruptcy, segregation, anonymous markets, information improvement

=> laizzes faire

Measuring discrimination:

partitioning: discriminatory vs. non-discriminatory diff.s

Non-discriminatory: education, experience/job tenure, compensating differences, mobility

Discriminatory: remainder or residual

role of occupational crowding?

Problems with measures:
1) reverse causality
2) unmeasured productivity differences
3) Oaxaca problem: would whites be paid like blacks or blacks like whites if discrimination ended? (or would it be a mix?)

The Persistence of Discrimination:
1) discrimination apparent, not real
2) discrimination disappearing, but takes time
3) consumer discrimination can persist
4) monopoly power can sustain discrimination

Outside the Market(supply-side factors)
1) Pre-market discrimination
2) Cultural and biological differences
3) the Underclass

Affirmative Action/Comparable Worth