Race Discrimination: An Economic Perspective

In this article, the authors review the empirical literature in economics on discrimination in the labor market and criminal justice system, focusing primarily on discrimination by race. They then discuss theoretical models of taste-based discrimination, particularly models of frictional labor markets and models of statistical discrimination, including recent work on invalid statistical discrimination. They explore and evaluate the evidence for and against these theories. Although there is substantial evidence of the existence of discrimination, little is known about the extent to which disparities are driven by discrimination. Finally, they argue that economists miss the important self-enforcing relationship between disparities and discrimination and the effect of disparities in one domain on discrimination in other domains.