ECONOMIC EXPLANATIONS OF DISCRIMINATION

Definition of Discrimination

When economic differences arise because of’ irrelevant personal characteristics such as race, gender, sexual orientation, or religion, we call this discriminant ion. Discrimination typically involves either (a) disparate treatment of people on the basis of personal  characteristics or (b) practices (such as tests) that have an adverse impact on certain groups. .• Economists who first began to study discrimination, like the University of Chicago’s Gary Becker, realized that a fundamental puzzle arises: If two groups of workers have equivalent productivity, but one has lower wages, why competitive profit-maximizing firms hire the 10 w Wage workers and increase their profits? For example, suppose that a group of managers in A competitive market decides to pay , blue-eyed workers more than equally productive brown-eyed workers.

Non discriminating firms could enter the market, undercut the costs and prices of the discriminating firms by hiring mainly brown-eyed workers, and drive the discriminating firms out of business. Thus, even if employers are biased against a group of workers, their bias should not be sufficient to reduce that group’s income. Becker’s analysis suggests, therefore, that forces other than pure discriminating attitudes are necessary to produce income disparities between equivalent groups.

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