The Dynamics of Statistical Discrimination

This article demonstrates how learning dynamics select among equilibria in a statistical discrimination model of employment. The static market model exhibits multiple equilibria. The belief revision dynamics generate a Markov market process which, in the long run, is mostly near one and only one of...

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Bibliographic Details
Published in:The Economic journal (London) 2006-11, Vol.116 (515), p.F480-F498
Main Author: Blume, Lawrence E.
Format: Article
Language:English
Subjects:
Data collection
Discrimination
Economic models
Economic theory
Employment
Equilibrium
Full employment
Hiring
Labor markets
Labour market
Learning
Market equilibrium
Markov analysis
Markovian processes
Minority groups
Profiling
Public policy
Racism
Recruitment
Statistical discrimination
Statistics
Studies
Subsidies
Underemployment
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Summary:This article demonstrates how learning dynamics select among equilibria in a statistical discrimination model of employment. The static market model exhibits multiple equilibria. The belief revision dynamics generate a Markov market process which, in the long run, is mostly near one and only one of the static equilibria, regardless of initial conditions. Usually policy effects appear in comparative statics, where the equilibrium set moves with different policies. But here policy is also seen to effect which equilibrium is selected even when it has no comparative statics effect at all.
ISSN:0013-0133
1468-0297
DOI:10.1111/j.1468-0297.2006.01133.x