Skip to main content
SpringerLink
Log in

Discrimination as Focal Point

Markets and Group Identity

  • Living reference work entry
  • First Online:
Handbook on Economics of Discrimination and Affirmative Action

  • 37 Accesses

Abstract

This chapter presents a theory of discrimination for markets in which there are complementarities between different tasks. It is shown that, in such a setting, even when groups are a priori identical, employers will end up discriminating against certain groups. Group discrimination serves the purpose of creating a focal point in a market game. In this model, the free market, far from curbing discrimination, nurtures it and thereby creates the need for purposive policy intervention. It is argued that, with the rise of technology, the problem of discrimination as focal point will get more acute and we will have to think in terms of affirmative action or a system of taxation and subsidy to support groups that get excluded.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Institutional subscriptions

Similar content being viewed by others

Notes

  1. 1.

    See Arrow (1973, 1998), Phelps (1972), Spence (1974), and Stiglitz (1974).

  2. 2.

    A polar case of this in a development context occurs in Kremer (1993).

  3. 3.

    Similar results were reported by Siddique (2008) who sent out applications in India using caste-based names. A paper by Thorat, Banerjee, Mishra, and Rizvi (2015) does a similar test for the home rental market in the National Capital Region, in and around Delhi, and record a similar bias against Muslims and Dalit applicants. For empirical studies, using other methodologies, which nevertheless suggest pure racial bias, see Hamilton et al. (2015) and Pager, Western, and Bonikowski (2009). For some engaging research based on legal analysis, see Sander (2006) and Coleman and Gulati (2005).

  4. 4.

    A more complex and also more realistic model is developed in Basu (2015).

  5. 5.

    It is not a matter to go into here, but this reference to commonsense and “reasoned intuition” is not a casual side remark. I have argued at length elsewhere that for science to be useful, we must combine it with these skills. Pure analysis of data or pure theory cannot help us help the world till we combine them with reasoned intuition (Basu 2014).

  6. 6.

    Among the most notable findings on this are studies by Ambady, Shih, Kim, and Pittinsky (2001) and Hoff and Pande (2006). See, also, Field and Nolen (2005), Hoff (2015), and World Bank (2015).

References

  • Akerlof G, Kranton R (2010) Identity economics: how our identities shape our work, wages, and well-being. Princeton University Press, Princeton

    Book  Google Scholar 

  • Ambady N, Shih M, Kim A, Pittinsky TL (2001) Stereotype susceptibility in children: effects of identity activation on quantitative performance. Psychol Sci 12:371

    Article  Google Scholar 

  • Arrow KJ (1973) Higher education as a filter. J Public Econ 2:193–216

    Article  Google Scholar 

  • Arrow KJ (1998) What has economics to say about racial discrimination? J Econ Perspect 12:91–100

    Article  Google Scholar 

  • Basu A (2016) Why Can’t laziness claim agency? The neo-Malthusian streak in contemporary feminism. Presented at conference on “Malthus: food, land, people”. Cambridge University, Cambridge, UK

    Google Scholar 

  • Basu K (2011) Beyond the invisible hand: groundwork for a new economics. Princeton University Press, Princeton

    Google Scholar 

  • Basu K (2014) Randomization, causality and the role of reasoned intuition. Oxf Dev Stud 42:455–472

    Article  Google Scholar 

  • Basu K (2015) Discrimination as a coordination device: markets and the emergence of identity. World Bank Policy Research working paper 7490

    Google Scholar 

  • Basu K (2016) Globalization of labor markets and the growth prospects of nations. J Policy Model 38(4):656–669

    Article  Google Scholar 

  • Bertrand M, Mullainathan S (2004) Are Emily and Greg more employable than Lakisha and Jamal? A field experiment on labor market discrimination. Am Econ Rev 94:991–1013

    Article  Google Scholar 

  • Coleman JE Jr, Gulati M (2005) Response to professor Sander: is it really all about the grades? N C Law Rev 84:1823–1839

    Google Scholar 

  • Deshpande A (2010) The grammar of caste. Oxford University Press, Oxford, UK

    Google Scholar 

  • Field E, Nolen P (2005) Race and student achievement in post-apartheid South Africa, mimeo: Harvard University

    Google Scholar 

  • Hamilton D, Darity W Jr, Price AE, Sridharan V, Tippett R (2015) Umbrellas don’t make it rain: why studying and working hard isn’t enough for Black Americans. Mimeo, The New School, New York

    Google Scholar 

  • Hoff K (2015) Behavioral economics and social exclusion: can interventions overcome prejudice?. World Bank Policy Research working paper 7198

    Google Scholar 

  • Hoff K, Pandey P (2006) Discrimination, social identity, and durable inequalities. Am Econ Rev 96:206–211

    Article  Google Scholar 

  • Jayadev A, Reddy SG (2011) Inequalities and identities. SSRN working paper

    Google Scholar 

  • Karabarbounis L, Neiman B (2014) The global decline of the labor share. Q J Econ 129:61–103

    Article  Google Scholar 

  • Kremer M (1993) The O-ring theory of economic development. Q J Econ 108:551–575

    Article  Google Scholar 

  • Pager D, Western B, Bonikowski B (2009) Discrimination in a low-wage labor market a field experiment. Am Sociol Rev 74:777–799

    Article  Google Scholar 

  • Phelps ES (1972) The statistical theory of racism and sexism. Am Econ Rev 62:659–661

    Google Scholar 

  • Sander RH (2006) The racial paradox of the corporate law firm. N C Law Rev 84:1755–1822

    Google Scholar 

  • Schelling T (1960) The strategy of conflict. Harvard University Press, Cambridge, MA

    Google Scholar 

  • Sen A (2006) Identity and violence. Alfred Knopf, New York

    Google Scholar 

  • Siddique Z (2008) Caste-based discrimination: evidence and policy. Mimeo, Northwestern University

    Google Scholar 

  • Spence M (1974) Market Signaling: information transfer in hiring and related screening processes. Harvard University Press, Cambridge, MA

    Google Scholar 

  • Stewart F (2005) Horizontal inequalities: a neglected dimension of development. In: WIDER perspectives on global development. Palgrave Macmillan, New York

    Google Scholar 

  • Stiglitz J (1974) Theories of discrimination and economic policy. In: von Furstenberg G (ed) Studies in the economics of discrimination. Lexington Books, London

    Google Scholar 

  • Subramanian S (2011) Inter-group disparities in the distributional analysis of human development: concepts, measurement, and illustrative applications. Rev Black Polit Econ 38:27–52

    Article  Google Scholar 

  • Swedberg R (1990) Economics and sociology. Princeton University Press, Princeton

    Book  Google Scholar 

  • Thorat S, Banerjee A, Mishra V, Rizvi F (2015) Urban rental housing market: caste and religion matters in access. Econ Polit Wkly (50):47–53

    Google Scholar 

  • World Bank (2015) World Development Report 2015: mind, society, and behavior. The World Bank, Washington, DC

    Book  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics and SC Johnson College of Business, Cornell University, Ithaca, NY, USA

    Kaushik Basu

Authors
  1. Kaushik Basu
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Kaushik Basu .

Editor information

Editors and Affiliations

  1. Delhi School of Economics, University of Delhi, New Delhi, India

    Ashwini Deshpande

Rights and permissions

Reprints and permissions

Copyright information

© 2022 Springer Nature Singapore Pte Ltd.

About this entry

Check for updates. Verify currency and authenticity via CrossMark

Cite this entry

Basu, K. (2022). Discrimination as Focal Point. In: Deshpande, A. (eds) Handbook on Economics of Discrimination and Affirmative Action. Springer, Singapore. https://doi.org/10.1007/978-981-33-4016-9_8-1

Download citation

  • DOI: https://doi.org/10.1007/978-981-33-4016-9_8-1

  • Received:

  • Accepted:

  • Published:

  • Publisher Name: Springer, Singapore

  • Print ISBN: 978-981-33-4016-9

  • Online ISBN: 978-981-33-4016-9

  • eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

Publish with us

Policies and ethics

Search

Navigation