Irrational Statistical DiscriminationFriederike Mengel
20. Mai 2021
Friederike Mengel (University of Essex, https://sites.google.com/site/friederikemengel/) presents her project "Irrational Statistical Discrimination" in the Microeconomics Research Seminar via Zoom on Thursday, May 20, 17:15-18:45. You may write to huyen.nguyen-1"AT"uni-hamburg.de or gero.henseler"AT"uni-hamburg.de to register for the seminar (getting the Zoom access data).
Abstract: Models of statistical discrimination typically assume that employers make rational inference from (education) signals. However, there is a large amount of evidence showing that most people do not update rationally. We use a model and two experiments to show that if employers are naive, in the sense of signal neglect, there is more discrimination than when employers are rational. Such irrational statistical discrimination makes high-skilled workers from disadvantaged groups less likely to pursue education as they anticipate employer naivete. In line with the theory, our data show that excess discrimination caused by employer naivete is especially important when signals are very informative. Out of the overall hiring gap in our data around 40% can be attributed to rational statistical discrimination, a further 40% is due to irrational statistical discrimination, and the remaining 20% is unexplained or potentially taste-based.