Field Experiments on Discrimination∗ Prepared for the Handbook of Field Experiments Marianne Bertrandy Esther Dufloz This version: January 7, 2016 Abstract This article reviews the existing field experimentation literature on the prevalence of discrimination, the consequences of such discrimination, and possible approaches to under- mine it. We highlight key gaps in the literature and ripe opportunities for future field work. Section 1 reviews the various experimental methods that have been employed to measure the prevalence of discrimination, most notably audit and correspondence studies; it also describes several other measurement tools commonly used in lab-based work that deserve greater consideration in field research. Section 2 provides an overview of the literature on the costs of being stereotyped or discriminated against, with a focus on self-expectancy effects and self-fulfilling prophecies; section 2 also discusses the thin field-based literature on the consequences of limited diversity in organizations and groups. The final section of the paper, Section 3, reviews the evidence for policies and interventions aimed at weakening discrim- ination, covering role model and intergroup contact effects, as well as socio-cognitive and technological de-biasing strategies. ∗Laura Stilwell and Jan Zilinsky provided excellent research assistance. We thank Abhijit Banerjee for com- ments. We are particularly grateful to Betsy Levy Paluck, our discussant, for her detailed and thoughtful review of an earlier draft. yBertrand: University of Chicago Booth School of Business, NBER, and J-PAL (email: Mari- [email protected]). zDuflo: MIT Economics Department, NBER, and J-PAL (email: edufl[email protected]). 1 Introduction Black people are less likely to be employed, more likely to be arrested by the police, and more likely to be incarcerated. Women are very scarce at the top echelon of the corporate, academic and political ladders despite the fact that (in rich countries at least) they get better grades in school and are more likely to graduate from college. While many in the media and public opinion circles argue that discrimination is a key force in driving these patterns, showing that it is actually the case is not simple. Indeed, it has proven elusive to produce convincing evidence of discrimination using standard regression analysis methods and observational data, in the sense in which we define discrimination throughout this chapter: members of a minority group (women, Blacks, Muslims, immigrants, etc.) are treated differentially (less favorably) than members of a majority group with otherwise identical characteristics in similar circumstances. However, over the last couple of decades, a rich literature in economics, sociology, political science and psychology has leveraged experiments (in the lab and in the field) to provide convinc- ing evidence that discrimination, thus defined, indeed exists. We begin this chapter by describing the various experimental methods that have been used to measure discrimination in the field. Overall, this literature offers staggering evidence of pervasive discrimination against minority or under-represented groups all around the world. We summarize this research and discuss some of its key limitations. If discrimination is as pervasive as the evidence suggests, what do existing theories tell us about the costs to minority groups and to society overall? The two workhorse models of discrim- ination in the economics literature give drastically different answers, particularly with respect to the societal consequences. In the first model, developed in Becker (1957) for the context of the labor market, some employers have a distaste for hiring members of the minority group. They may indulge this distaste by refusing to hire, say, Blacks or, if they do hire them, paying them less than other employees for the same level of productivity. If the fraction of discriminating em- ployers in the economy is sufficiently large, a wage differential will emerge in equilibrium between otherwise identically productive minority and majority employees and this wage differential will be a reflection of the distaste parameter of the marginal employer for minority workers (Becker, 1957; Charles and Guryan, 2008). By electing to not hire minority workers, infra-margin racist employers will experience lower profits. In fact, if the conditions of perfect competition were 2 satisfied, discriminating employers would be wiped away and taste-based discrimination would disappear.1 This “taste-based” explanation for discrimination stands in contrast with what many economists would view as a more disciplined explanation, which does not involve an ad-hoc (even if intuitive) addition to the utility function (animus towards certain groups) to help rationalize a puzzling behavior. In a “statistical discrimination” model (Phelps, 1972; Arrow, 1973; Aigner and Cain, 1977), the differential treatment of members of the minority group is due to imperfect infor- mation, and discrimination is the result of a signal extraction problem. As a profit-maximizing prospective employer, renter, or car salesman, tries to infer the characteristics of a person that are relevant to the market transaction they are considering to complete with that person, they use all the information available to them. When the person-specific information is limited, group- specific membership may provide additional valuable information about expected productivity. For example, again using the labor market scenario, it may be known to employers that minority applicants are on average less productive than majority applicants. In this case, an employer who sees two applicants with similar noisy but unbiased signals of productivity should rationally favor the majority applicant to the minority one as her expected productivity is higher. While expected productivity will equal true productivity on average within each group, statistical dis- crimination will result in some minority workers being treated less favorably than non-minority workers of the same true productivity, i.e. will result in discrimination as defined above. In the extreme case where individual signals of productivity are totally uninformative, an employer may rationally decide to make offers only to Whites if the mean productivity among Blacks does not exceed the required threshold. While taste-based discrimination is clearly inefficient (simply consider how it constrains the allocation of talent), statistical discrimination is theoretically efficient and hence more easily defendable in ethical terms under the utilitarian argument. Moreover, statistical discrimination can also be argued to be “fair” in that it treats identical people with the same expected produc- tivity (even if not with the same actual productivity) and is not motivated by animus. In fact, many economists would most likely support allowing statistical discrimination as a good policy, even where it is now illegal (as it is, for example, in the US labor market and real estate market 1Refusing to hire black people could be efficient if the employer knows he cannot work well with them due to his animus, but this does not take away from the fact that businesses that do this should not survive. 3 contexts). Unfortunately, as we discuss below, while field experiments have been overall successful at documenting that discrimination exists, they have (with a few exceptions) struggled with linking the patterns of discrimination to a specific theory. Meanwhile, psychologists have made considerable progress in their own understanding of the roots of discrimination, on a largely parallel track. The theories they have advanced and the (mainly lab) experiments they have conducted have been helpful in better nailing the micro- foundations of discrimination. We believe this body of work blurs the sharp line economists tend to draw between taste-based and statistical explanations. Psychologists’ work on discrimination is embedded in an immense literature that attempts to understand the roots of prejudice, widely characterized as negative evaluation of others made on the basis of their group membership. This literature has looked for the micro-foundations of such negative evaluation in a wide variety of areas, including personality development, socialization, social cognition, evolutionary psychology and neuroscience. Early scholarship in psychology viewed prejudice as a form of abnormal thinking and equated it to a psychopathology (think Adolf Hitler) that could be treated by addressing the personality disorders of subset of the population that was “diseased.” It was only in the second half of the twentieth century that that the prevalent view of prejudice among psychologists became rooted in normal thinking processes (Dovidio, 2001), with socialization and social norms being viewed as dominant drivers. Influential work by Tajfel (Tajfel, 1970; Tajfel and Turner, 1979) demonstrated the key role social identity plays in the process underlying prejudice. Experimental evidence has shown that the assignment of people to groups, even if totally arbitrary ones and even if they do not last, is sufficient to produce favoritism for in-group members and negativity towards out- group members. At the same time, evolutionary psychology has stressed the importance of social differentiation and the delineation of clear group boundaries as a way to achieve the benefits of cooperation between human beings without the risk of excessive costs, with group membership and group identity emerging as a form of contingent