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Discrimination as favoritism: The private benefits and social costs of in-group favoritism in an experimental labor market

Author

Listed:
  • David Dickinson

    (IZA Department of Economics - Appalachian State University)

  • David Masclet

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Emmanuel Peterle

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE])

Abstract
In this paper, we examine labor market favoritism in a unique laboratory experiment design that can shed light on both the private benefits and spillover costs of employer favoritism (or discrimination). Group identity is induced on subjects such that each laboratory "society" consists of eight individuals each belonging to one of two different identity groups. In some treatments randomly assigned employer-subjects give preference rankings of potential worker-subjects who would make effort choices that impact employer payoffs. Though it is common knowledge that group identity in this environment provides no special productivity information and cannot facilitate communication or otherwise lower costs for the employer, employers preferentially rank in-group members. In such instances, the unemployed workers are aware that an intentional preference ranking resulted in their unemployment. Unemployed workers are allowed to destroy resources in a final stage of the game, which is a simple measure of the spillover effects of favoritism in our design. Though we find evidence that favoritism may privately benefit a firm in terms of higher worker effort, the spillover costs that result highlight a reason to combat favoritism/discrimination. This result also identifies one potential micro-foundation of societal unrest that may link back to labor market opportunity.

Suggested Citation

  • David Dickinson & David Masclet & Emmanuel Peterle, 2018. "Discrimination as favoritism: The private benefits and social costs of in-group favoritism in an experimental labor market," Post-Print halshs-01767518, HAL.
    • Handle: RePEc:hal:journl:halshs-01767518
    DOI: 10.1016/j.euroecorev.2018.03.004
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01767518v1
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    Cited by:

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    3. Élisabeth Tovar & Matthieu Bunel, 2019. "Profit vs morality: how unfair is labor market discrimination? Results from a survey experiment," Working Papers hal-04141860, HAL.
    4. Sheheryar Banuri & Catherine Eckel & Rick K. Wilson, 2022. "Does cronyism pay? Costly ingroup favoritism in the lab," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1092-1110, July.
    5. Elisabeth Tovar & Mathieu Bunel, 2019. "Profit vs morality: how unfair is labor market discrimination? Results from a survey experiment," Post-Print hal-02459378, HAL.
    6. David MASCLET & David L. DICKINSON, 2024. "Incorporating Conditional Morality into Economic Decisions," Economics Working Paper Archive (University of Rennes & University of Caen) 2024-04, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    7. Fortuna Casoria & Ernesto Reuben & Christina Rott, 2022. "The Effect of Group Identity on Hiring Decisions with Incomplete Information," Management Science, INFORMS, vol. 68(8), pages 6336-6345, August.
    8. Schmidt, Robert J. & Trautmann, Stefan T., 2019. "Implementing (Un)fair Procedures? Favoritism and Process Fairness when Inequality is Inevitable," Other publications TiSEM 125472e2-51a2-4cf9-aab5-1, Tilburg University, School of Economics and Management.
    9. Sanjaya, Muhammad Ryan, 2023. "Antisocial behavior in experiments: What have we learned from the past two decades?," Research in Economics, Elsevier, vol. 77(1), pages 104-115.
    10. Ďuriník, Michal & Morita, Hodaka & Servátka, Maroš & Zhang, Le, 2023. "Promotions and Group Identity," MPRA Paper 119389, University Library of Munich, Germany.
    11. Alexandros Karakostas & Nhu Tran & Daniel John Zizzo, 2022. "Experimental Insights on Anti-Social Behavior: Two Meta-Analyses," Discussion Papers Series 658, School of Economics, University of Queensland, Australia.
    12. repec:awi:wpaper:661 is not listed on IDEAS
    13. Emanuela Ghignoni, 2017. "Who do you know or what do you know? Informal recruitment channels, family background and university enrolments," Working Papers in Public Economics 179, University of Rome La Sapienza, Department of Economics and Law.
    14. Urs Steiner Brandt & Gert Tinggaard Svendsen, 2019. "How robust is the welfare state when facing open borders? An evolutionary game-theoretic model," Public Choice, Springer, vol. 178(1), pages 179-195, January.

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    More about this item

    Keywords

    Discrimination; Experimental Economics; Social identity; Conflict;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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