Research on the Economics of Discrimination: New Empirical Methods, Theory and Applications

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Racial and gender disparities have been documented in many areas, including employment, health care, mortgage and other lending situations, motor vehicle stops and searches as well as in other scenarios of law enforcement such as jury selection, prosecution and sentencing. Two of the most important causes for the observed racial and gender disparities are racial/gender prejudice and statistical discrimination. The term "prejudice'' refers to the presence of a psychic utility differential accrued by "the decision-makers" (i.e. the employers, the doctors, the lenders, the police officers, the judges etc.) in making their decisions on "the treated" (the job applicant, the patient, etc.) when the treated have different races and genders. In contrast, the term "statistical discrimination" refers to a scenario in which the "decision-makers" see "the treated" with dissimilar races and genders differently only because of the legitimate information that is contained in race and gender characteristics. Two important and related questions are addressed. First, how can one distinguish the roles of racial/gender bias from that of statistical discrimination in the observed racial/gender disparities? Second, what are potential issues to be aware of in the attempts via, e.g. affirmative action policies, to reduce the disparities? The investigators develop new empirical methods and theory as well as new empirical applications to address these questions. In the first project of this proposal, the investigators propose a unified and general framework to formally investigate the conditions under which disparities caused by prejudice and statistical discrimination can be distinguished. The general framework allows the investigators to formally assess the validity of many existing tests in the literature, and also permits them to propose valid empirical tests. In the second project of the proposal, the investigators suggest and empirically implement an outcome-based test for the role of prejudice among emergency department physicians based on the bounceback rates of patients who are discharged from their initial emergency department (ED) visit upon some diagnostic tests. This empirical application is a new contribution to our understanding of the large racial disparities in health care access and health outcomes. In a third project, the researchers analyze the potential problems caused by the fact that a policy-maker - who is interested in increasing racial and/or gender diversity in the workplace - typically has to delegate the hiring decisions to an agent, and the principal and the agent may have conflicting objectives. Two important questions are addressed. First, how do the delegation decision and conflict of interest aspects of the affirmative action problem affect the achievement of affirmative action goals? Two, what are the potential strategies that the principal may adopt to alleviate these problems? Given the importance of racial and gender disparities, as well as existing affirmative action efforts to reduce such disparities, this investigation will bring many new theoretical insights, empirical methods and facts to the social discourse on issues of racial and gender equality.