An Absolute Test of Racial Prejudice

Philip Marx

The Journal of Law, Economics, and Organization, 2022, vol. 38, issue 1, 42-91

Abstract: Disparities along racial and ethnic lines persist across domains. Distinguishing among the possible sources of such disparities matters. This article introduces an absolute test for identifying prejudice in the presence of statistical discrimination. In the context of police officers deciding whether to conduct vehicle searches, the key intuition of the test is that each officer’s search decisions and search outcomes generate a point on a concave “return possibility frontier,” (RPF) whose slope equals the officer’s search cost, or personal standard of evidence for conducting a search. Variation along a RPF provides information about search costs, and a discrepancy in these costs across drivers of different races constitutes prejudice. The model and test generalize and unify the existing literature, and the test can be partially extended to the setting where officers vary in the quality of their information, or discernment. Higher discernment generates an expansion of the frontier, and a version of the test remains valid for more discerning officers. Empirically, the test finds suggestive evidence of prejudice against Hispanic drivers and of varying discernment among officers of different races and ethnicities. These results are robust to (and not well explained by) officer experience. (JEL C26, K42, J15)

Date: 2022
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