Faculty of Economics and Business Administration Publications Database

Discrimination without taste: how discrimination can spillover and persist

Ramachandran, Rajesh
Rauh, Christopher
Pages: 249 - 274
Link External Source: Online Version
Year: 2018
Keywords: Discrimination; Coordination failure; Beliefs; Inequality

We introduce coordination failures driven by beliefs regarding the presence of taste dis-
criminators as a channel of discrimination in productive activities requiring the input

of multiple agents. We show that discrimination can persist under perfectly observable
ability, when taste for discrimination has died out, and under absence of discriminatory
social norms. Empirically we analyze the market for self-employment—an activity

commonly requiring inputs from multiple agents. Consistent with the theoretical pre-
dictions, beliefs about discrimination are a significant correlate of self-employment

rates, as well as the cost and success of establishing productive relations for blacks in
the US.