Journal Article

Statistical Discrimination and Efficiency

Peter Norman

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 70, issue 3, pages 615-627
Published in print July 2003 | ISSN: 0034-6527
Published online July 2003 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00258
Statistical Discrimination and Efficiency

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  • Demographic Economics
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This paper asks whether statistical discrimination is a market failure. I consider the problem for a utilitarian social planner who operates in an environment that can generate statistical discrimination as an equilibrium phenomenon. It is found that there are potential efficiency gains from discrimination in terms of reduced “mismatch” between workers and jobs. Whether the solution to the planning problem involves discrimination depends on the trade-off between the informational gains of specialization and the losses in terms of increased investment costs.

Keywords: J15; J16; J71

Journal Article.  6020 words.  Illustrated.

Subjects: Demographic Economics ; Labour Discrimination

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