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Discrimination with Inaccurate Beliefs and Confirmation Bias

Christian Ruzzier () and Marcelo Woo

No 163, Working Papers from Universidad de San Andres, Departamento de Economia

Abstract: We examine patterns of discrimination when employers hold incorrect beliefs about the relationship between group membership and productivity, and suffer from confirmation bias when updating their beliefs. As a result, employers do not correct them fully, leading to persistent wage discrimination. Negative stereotypes generate discrimination against minority workers upon entry to the labor market, but are not enough to have discrimination in the long run, and reversals in discrimination are possible. We also discuss whether interventions aimed at reducing discrimination would succeed if confirmation bias is an important source of discrimination, and consider segregation in an extension with heterogeneous employers.

Keywords: learning; confirmation bias; stereotypes; discrimination; segregation; labor market (search for similar items in EconPapers)
JEL-codes: D90 D91 J71 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2022-02, Revised 2022-02
New Economics Papers: this item is included in nep-lma
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Downloads: (external link) First Version, February 2022

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