TY  - JOUR
AU  - Berk,Jonathan B.
TI  - Statistical Discrimination in a Competitive Labor Market
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6871
PY  - 1999
Y2  - January 1999
UR  - http://www.nber.org/papers/w6871
L1  - http://www.nber.org/papers/w6871.pdf
N1  - Author contact info:
Jonathan B. Berk
Graduate School of Business
Stanford University
518 Memorial Way
Stanford CA 94305-5015
Tel: 650/721-1280
Fax: 650/725-6152
E-Mail: jonathan.b.berk@gmail.com
AB  - This paper studies the effect of employee job selection in a model of statistical discrimination in a competitive labor market. In an economy in which there are quality differences between groups, a surprisingly strong condition is required to guarantee discrimination against the worse qualified group --- MLRP must hold. In addition, because of the self-selection bias induced by competition,  the resulting discrimination is small when compared to the magnitude of the underlying quality differences between groups. In cases in which the discrimination results because employers' ability to measure qualifications differs from one group to another, the conditions under which one group is discriminated against are much weaker.  In general, the group employers know  least about is always favored.  The economic impact of discrimination that is derived from quality differences between groups is shown to be quite different to the economic impact of discrimination that derives from differences in employer familiarity between groups. In the latter case, for a set of equally qualified employees, it is possible for  members of the group that is discriminated against to have higher wages. Finally, we show how the results can be used to explain a number of empirical puzzles that are documented in the literature.
ER  -