Statistical discrimination is a theory of inequality between demographic groups based on stereotypes that do not arise from prejudice or racial and gender bias. When rational, information-seeking decision makers use aggregate group characteristics, such as group averages, to evaluate individual personal characteristics, individuals belonging to different groups may be treated differently even if they share identical observable characteristics in every other aspect. Discrimination can be the agents’ efficient response to asymmetric beliefs, or discriminatory outcomes may display an element of inefficiency: the disadvantaged group could perform better if beliefs were not asymmetric across groups (but beliefs are asymmetric because the disadvantaged are not performing as well as the dominant group).
KeywordsDiscrimination Inequality Statistical discrimination Wage determination
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