Experience-based Discrimination

I study discrimination arising from individual experiences of employers with worker groups. I present a model in which employers are uncertain about the productivity of one of two groups and learn through hiring. Positive experiences lead to positive biases which correct themselves by leading to more hiring and learning. Negative experiences decrease hiring and learning, preserving negative biases which can cause persistent discrimination. The model explains prejudice as “incorrect” statistical discrimination and generates novel predictions and policy implications. I then illustrate experience- based discrimination in an experimental labor market, finding support for key model predictions.