Statistical Discrimination David L. Dickinson Appalachian State University April 2006: GATE.

“Maximal Quality Selection and Discrimination in Employment.” Douglas D. Davis, 1987, JEBO. Statistical Discrimination  Non-prejudiced based. Motivations for racial (e.g.) ability perceptions are not abundant.  Ability perceptions may be lower for minority workers if employers interview fewer minorities. That is, the sample maximum increases in # draws. External validity is with “upper-credential” hiring environments…..we want “the best”!  The benefit of experiments is that prejudice can be lab- controlled (difficult to control in the field, however).

Experimental Design Critical features  Costly search  Incentive to select only “best” candidates  Opportunity to reflect perceptions of minority inferiority  Controlled payoff distributions to searcher (employer), and proportion of ‘minority’ observations controlled.  Context neutral—no reference to race, gender, etc.

Design Specifics Subject sees Box g and Box h. Each box is a prize distributions, and subjects may sample each distribution for 1-3 cents per observation (80% of sample purchased comes from ‘majority’ Box, which subjects do not know). Payoffs are chosen prize minus total sampling costs. Distributions of Boxes changes every six decision periods, and only on 6 th decision period can subjects choose Box from which sample is draws occur.  Main hyp is supported if subjects choose from majority Box more frequently

Results Each subject generates 2 observations on experimental parameter ‘cells’ (Table 1) (N=80). Proportion of minority Box choices=.36<.50.  Modal choice proportion, however, is.50.  Minority superiority also a regular choice (order statistics go both ways).  TAB sheet recording may worsen the situation (though not statistically significant)  A prejudiced MARKET TIP significantly biases selections away from minority Box (Table 4). Evidence in Table 5 suggests that minority Box (population) must be significantly better, in terms of mean prize, than majority Box to create perception of equality.

Conclusions Greatest perception of minority inferiority appear with TAB or MARKET TIP. Presumed equality only occurs with a higher mean outcome from less frequently sampled (minority) group. Practical applicability?  EEO interview quotas, productivity distribution equality?