Group status,minorities and trust

We present the results of an experiment measuring the impact of low group status and relative group size on trust, trustworthiness and discrimination. Subjects interact with insiders and outsiders in trust games and periodically enter markets where they can trade group membership. Low status and minority subjects have low morale: that is, they comparatively dislike being low status and being minority subjects. Group discrimination against low status and minority subjects is unchanged. However, low status subjects are deferential to high status subjects in terms of comparatively higher trust, and minority subjects are deferential to majority subjects in terms of comparatively higher trustworthiness.     

Economic discrimination in a two-good model

Conclusions The main conclusion of this study is that in the general case we cannot make any predictions regarding the effects of discrimination on the welfare of whites or blacks. To reach definite results special assumptions have to be made, and even then much depends on in terms of which good the effects are measured.Joseph E. Stiglitz has criticized the trade approach to discrimination on the grounds that once the step is taken from the simple Beckerian one-good model to the full-fledged two-by-two-by-two framework used in international trade theory this approach can no longer explainwage differences, since the factor equalization theorem will apply, at least as long as the two groups are not totally specialized in production⁸. This criticism can be extended in the light of the results of the present work. We have in the foregoing seen how even in a model that assumes total specialization in production we cannot reach any clear-cut conclusions regarding under which circumstances it pays for the majority group to discriminate against the minority. Maximization of majority welfare by means of economic discrimination simply requires too much information, at least when the trade approach is used. Other theories are likely to yield better explanations regarding the causes of discrimination, and future research is likely to become more fruitful if attention is concentrated more on alternative approaches.The research was financially supported by the Swedish Council for Social Science Research (Statens råd för samhällsforskning). Thanks are due to an anonymous referee for thorough and helpful comments on an earlier version of this paper.     

Formation and persistence of oppositional identities

We develop a dynamic model of identity formation that explains why ethnic minorities may choose to adopt oppositional identities (i.e. some individuals may reject or not the dominant culture) and why this behavior may persist over time. We first show that the prevalence of an oppositional culture in the minority group cannot always be sustained in equilibrium. Indeed, because the size of the majority group is larger, there is an “imposed” process of exposition to role models from the majority group that favors the diffusion of mainstream values in the minority community. In spite of this, an oppositional culture in the minority group can nevertheless be sustained in steady state if there is enough cultural segmentation in terms of role models, or if the size of the minority group is large enough, or if the degree of oppositional identity it implies is high enough. We also demonstrate that the higher the level of harassment and the number of racist individuals in the society, the more likely an oppositional minority culture will emerge. We finally show that ethnic identity and socialization effort can be more intense in mixed rather than segregated neighborhoods.     

Does Equal Pay Legislation Reduce Labour Market Inequality?

This paper considers a labour market model of monopsonistic competition with taste-based discrimination against minority workers to study the effect of equal pay legislation on labour market inequality. When the taste for discrimination is small or competition is weak, the policy removes job segregation and the wage gap completely. However, with a bigger taste for discrimination or stronger competition, equal pay legislation leads to more job segregation, and sometimes minority workers end up earning less than before. Profits of discriminating firms might increase, and discrimination can persist in the long run, although it would have disappeared without the policy.     

Group decision-making in the shadow of disagreement

A model of group decision-making is studied, in which one of two alternatives must be chosen. While agents differ in their preferences over alternatives, everybody prefers agreement to disagreement. Our model is distinguished by three features: private information regarding valuations, differing intensities in preferences, and the option to declare neutrality to avoid disagreement. There is always an equilibrium in which the majority is more aggressive in pushing its alternative, thus enforcing their will via both numbers and voice. However, under general conditions an aggressive minority equilibrium inevitably makes an appearance, provided that the group is large enough. Such equilibria invariably display a “tyranny of the minority”: the increased aggression of the minority always outweighs their smaller number, leading to the minority outcome being implemented with larger probability than the majority alternative. We fully characterize the asymptotic behavior of this model as group size becomes large, and show that all equilibria must converge to one of three possible limit outcomes.     

The Alleged Value Neutrality of Economics: An Alternative View

This paper analyzes bank lending activities for owner-occupied housing loan extensions to minority members of Mississippi’s population. We analyze data on housing loan applications and accessibility patterns among the minority Black population relative to the majority White population groups in the State. The study looks hard at data for evidence of any patterns of discrimination toward minority housing loan applicants. And a Probit model is applied to examine the relative importance of economic variables (such as employment status, income level, and credit rating) versus noneconomic parameters (such as geographical location) in the housing loan decision making of banks toward minority borrowers. The evidence from our comparative data analysis suggests that there is a consistently high denial rates for minorities, which is not explained by financial (economic) factors. The formal test of discrimination with the Probit analysis also indicates some evidence of discrimination from, at least, the standpoint of redlining practices, albeit only with a modest predictive power.     

Ethnic patterns of returns to education in Bulgaria

It is widely accepted that disparities in education contribute to the poor labour market outcomes experienced by ethnic minority groups and consequently to their poverty. In this article, I analyse differential educational benefits in Bulgaria and compare returns to education for the Roma minority with the majority population and the Turkish minority. I show that both ethnic minority groups have lower education levels and employment rates than the majority population and that they also have lower returns to education. This result could be related to minorities' lower education quality as well as to discrimination in the labour market. Integration policies should thus aim to improve employability and labour market competence of vulnerable groups starting from school.     

A general equilibrium model of statistical discrimination

We study a general equilibrium model with endogenous human capital formation in which ex ante identical groups may be treated asymmetrically in equilibrium. The interaction between an informational externality and general equilibrium effects creates incentives for groups to specialize. Discrimination may arise even if the corresponding model with a single group has a unique equilibrium. The dominant group gains from discrimination, rationalizing why a majority may be reluctant to eliminate discrimination. The model is also consistent with “reverse discrimination” as a remedy against discrimination since it may be necessary to decrease the welfare of the dominant group to achieve parity.     

Racial Discrimination in English football

This paper examines data on the racial composition and financial and sporting performance of professional English soccer teams between 1974 and 1993. In an earlier paper, Szymanski showed that teams with an above average proportion of black players would tend to perform better on average that would have been expected given the aggregate wage bills of these clubs. Since players are more or less freely traded in soccer this presents strong market‐based evidence of discrimination. In the present paper we explore the source of such discrimination. In particular we are concerned to test the hypothesis that discrimination is attributable to the fans rather than the owners. If fans were racially prejudiced then the owners of a team might expect to generate a smaller marginal revenue product from a black player compared to an equally skilled white player. We assess the presence of fan discrimination by examining relationships between attendance, revenues, performance and the proportion of black players in the team. We also incorporate evidence regarding statements of racial prejudice (from the British Social Attitudes Survey) in particular regions. We find little evidence that the discrimination against black players has its source in fan discrimination.     

Economic history and history of economics

Trust, along with other influential norms of cooperation, has been traditionally viewed as an important coordination mechanism stabilizing expectations of the participants in the informal economic exchanges. Drawing on the example of the informal value transfer system called hawala, this paper, however, shows that the role of safeguard against opportunism in the informal monetary settings is much more reliably performed by the instruments of social control. Norms of control embedded in community beliefs and common social practices among the hawala members entirely replace trusting attitudes, rendering them superfluous for the purpose of protecting financial interests of clients and intermediaries in this informal system of monetary exchanges.     

Perverse committee appointments may foster divide and rule

A plurality-rule spatial committee can select an extreme decision if a bare minority of members prefer the opposite extreme decision: the majority who prefer a moderate decision are immobilised by internal divisions. Consequently, a nominator may appoint candidates with the opposite preference ordering so as to build up the bare minority. Our results may explain why Disraeli extended the franchise to skilled male workers in 1867 against centrist opposition; and why an electorate whose preferences are not polarized may have to choose between extremist candidates.     

Ethnic identities,public spending and political regimes

Do democracies discriminate less against minorities as compared to non-democracies? How does the dominance of an ethnic group affect discrimination under various political regimes? We build a theory to analyse such questions. In our model, political leaders (democratically elected or not) decide on the allocation of spending on different types of public goods: a general public good and an ethnically-targetable public good which benefits the majority ethnic group while imposing a cost on the other minorities. We show that, under democracy, lower ethnic dominance leads to greater provision of the general public good while higher dominance implies higher provision of the ethnically-targetable good. Interestingly, the opposite relation obtains under dictatorship. This implies that political regime changes can favour or disfavour minorities based on the ambient level of ethnic dominance. Several historical events involving regime changes can be analysed within our framework and are consistent with our results.     

Calhoun's constitutional economics

Calhoun's early speeches and writings argue for an expansive national government. His later works, most notablyA Disquisition on Government, argue for a strong version of states' rights, nullification, and secession. Earlier accounts of Calhoun's thought attribute this apparent contradiction to political expediency and opportunism. But I argue here that Calhoun's early nationalism was a reaction against the operation of multiple vetoes in the legislative process, requiring near unanimity to pass legislation. By 1825, however, Congress had evolved institutions that circumvented these vetoes, resulting in majoritarian redistribution. The later Calhoun opposed the legislation that followed from these circumventions and proposed an alternative form of unanimity, the concurring majority, as the appropriate corrective. An earlier version of this essay was prepared for a public lecture at Clemson University, to commemorate the Clemson University Centennial, October 18, 1989.     

Emigration intentions of Roma: evidence from Central and South-East Europe

The Roma constitute the largest, poorest and youngest ethnic minority group in Europe. Over the last few years, they have attracted unprecedented attention with the fear of massive waves of emigrants to Western European countries. Using unique comparative data from 12 Central and South-East European countries, we study the pattern and determinants of Roma emigration intentions. We find that plans to go abroad are more frequent among Roma compared to non-Roma, but the ethnic gap in emigration intentions is not explained by the more disadvantaged characteristics of Roma compared to non-Roma. Among the Roma population, potential emigrants are more educated and wealthier on average. Finally, ethnic discrimination is a very influential factor that explains the intentions to emigrate within the Roma population.     

Transaction costs as determinants of opportunism in integrated and independent sales forces

This study is an empirical test of the transaction cost determinants of opportunism by salespeople who sell electronic components in 169 U.S. sales districts. Opportunism by salespeople, as reported by their supervisors, is modeled as a function of (i) whether the salesperson is an employee or a manufacturers' representative; (ii) characteristics of the sales environment central to transaction cost analysis. The results generally support the transaction cost framework. They indicate that an especially powerful way to combat opportunism is to induce salespeople to perceive high goal congruence, i.e., that what benefits the company benefits them.     

GOVERNMENT‐MANDATED DISCRIMINATORY POLICIES: THEORY AND EVIDENCE*

We study an economy with private and public sectors in which workers invest in imperfectly observable skills that are important to the private sector but not to the public sector. Government regulation allows native majority workers to be employed in the public sector with positive probability while excluding the minority from it. We show that even when the public sector offers the highest wage rate, it is still possible that the discriminated group is, on average, economically more successful. The widening Chinese/Malay wage gap in Malaysia since the adoption of its New Economic Policy in 1970 supports our model.     

Poverty among ethnic minorities: the transition process,inequality and economic growth

This article investigates the process of reducing poverty in ethnic minority households. Using two recent Vietnam household surveys, we find that ethnic minority households are more likely to be persistently poor and less likely to be persistently non-poor than ethnic majority households. The within-group component generated by the variation in income within each ethnicity group explains more than 90% of the change in total inequality. Income redistribution plays an important role in decreasing the poverty gap and decreasing poverty severity. Different ethnic groups have different poverty patterns, which should be noted when designing policies to alleviate poverty and inequality.     

现代主流经济学对制度“设计”的误导和扭曲——从法律对强者机会主义行为的约束谈起

基于自然主义思维,现代主流经济学不仅用供求博弈均衡来为这种现状提供合理性解释,而且根据力量博弈均衡来设计社会制度,结果,经济学从热衷于对社会正义的关注和社会制度的改造蜕变成为既得利益和现实制度进行辩护的保守学说,并扭曲了立法的根本目的。事实上,法律的现实功能在于抑制机会主义行为以保障社会契约的履行,而强势者因拥有违反契约的更强能力而具有明显的机会主义倾向,因而立法的直接目的就是抑制强势者的机会主义行为。而且,法律本质上是为了理顺公共领域的社会关系,保障人民的应得权利,因而不应该是参与方之博弈均衡的简单体现。     

Minorities and Endogenous Segregation

A theoretical analysis is proposed of segregation as an equilibrium phenomenon in a random-matching model of the marriage market. Otherwise identical partners possess a pay-off-irrelevant characteristic, colour. We derive the set of colour-blind equilibria and show that they are generically constrained inefficient. Equilibrium segregation strategies are strategies that condition actions on the type of match. It is shown that distributions of types exist such that segregation equilibrium pay-offs Pareto dominate colour-blind pay-offs. For other distributions, segregation also generates conflict, where the majority unambiguously gains, while the minority group may lose. Giving preferential treatment, that is, minority bias, can increase overall welfare.     

Belief flipping in a dynamic model of statistical discrimination

The literature on statistical discrimination shows that ex-ante identical groups may be differentially treated in discriminatory equilibria. This paper constructs a dynamic model of statistical discrimination and explores what happens to the individuals who nonetheless overcome the initial discrimination. If an employer discriminates against a group of workers in her initial hiring, she may actually favor the successful members of that group when she promotes from within the firm. The worker's welfare implications (i.e. who benefits from an employer's discriminatory hiring practices) are unclear. Even though agents face discrimination initially, some may be better off because of it.