Firms that employ statistical discrimination in the labor market will earn higher profits in expectation than firms that do not discriminate (and have no effective screens).

Question

Quizplus · Accepted Answer

Statistical discrimination involves using observable characteristics, such as gender or race, to make assumptions about individual potential productivity in a job role. Firms that use statistical discrimination can potentially hire more productive workers and avoid hiring less productive workers, leading to higher profits. However, this also perpetuates discrimination and can lead to unequal treatment of individuals.

Firms That Employ Statistical Discrimination in the Labor Market Will