Taste-based or statistical discrimination: The economics of discrimination returns to its roots, The Economic

We briefly review the evolution of empirical work on discrimination. We discuss why traditional regression-based approaches neither convincingly measure market discrimination nor disentangle the relative importance of animus versus statistical discrimination in explaining such discrimination as exists. We describe the development of modern correspondence studies. We argue that these studies have the promise to credibly identify the presence of discrimination if not its magnitude, can inform us about the underlying mechanism generating discrimination and can also point to avenues for new theoretical and empirical work on discrimination. We discuss two articles with exemplary applications of these new methods. At least since Becker (1957), economists have been deeply interested in the presence of discrimination in markets. In the 1970s and into the 1980s, there was an active debate in the literature about whether discrimination was better described by Becker’s taste-based discrimination model, or by Arrow and Phelps ’ statistical discrimination model. That debate gave way to a theoretical literature that advanced each model separately and to an empirical literature focused on documenting the presence of disparities and the effects of policies designed to counteract discrimination. Onl