Employment and Statistical Discrimination: A Hands-on Experiment

Abstract

The purpose of this experiment is to illustrate the economic inefficiencies that result from discriminatory hiring practices as well as outline the economic rationale that exists for statistical discrimination to occur. Each participant acts as an employer charged with maximizing output by attempting to hire 8 workers out of 20 with high productive characteristics. There are three labor markets designed for this experiment and three rounds of the experiment for each labor market. The labor markets are differentiated by the distribution of the workers among a certain output range. The three rounds are associated with different interviewing costs. Results of the experiment conducted with 57 teams of college students are analyzed and discussed.