Discrimination and Economic Expectations

William Bazley (), Yosef Bonaparte (), George Korniotis () and Alok Kumar ()
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William Bazley: University of Kansas, Lawrence, Kansas 66045
Yosef Bonaparte: University of Colorado at Denver, Denver, Colorado 80204
George Korniotis: Miami Herbert Business School, Coral Gables, Florida 33146
Alok Kumar: Miami Herbert Business School, Coral Gables, Florida 33146

Management Science, 2024, vol. 70, issue 6, 4115-4131

Abstract: This paper examines whether perceptions of discrimination affect the economic expectations of U.S. households. We focus on two forms of expectations that play a central role in economic and financial decisions of households: labor income and inflation. Using experimental data, we demonstrate that discrimination generates greater dispersion in household forecasts. It increases subjective expectations of income uncertainty by 8% and inflation uncertainty by 5%. The impact of discrimination is concentrated among racial/ethnic minorities, inducing 12%–16% greater variation in their income uncertainty expectations and 10%–12% greater variation in their inflation uncertainty expectations. Both psychological and emotional factors appear to influence the discrimination–economic expectations relation.

Keywords: economic expectations; discrimination; racial/ethnic minorities; inflation uncertainty; income uncertainty (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:70:y:2024:i:6:p:4115-4131

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