A New Test for Labor Market Discrimination
The literature on labor market discrimination classifies two general types of discrimination: taste-based discrimination and statistical discrimination. In practice, knowing the type of discrimination is important for anti-poverty policy makers. This project aims to provide a novel way (1) to test for whether firms discriminate on the basis of easily observable characteristics such as race, gender, or education and (2) to identify the type of discrimination if firms do discriminate. The research will explore the patterns of lay-off and hiring of young workers, hypothesizing differences depending on the type of discrimination. When there is statistical discrimination, lay-off and employment processes are symmetric. When there is taste-based discrimination, lay-off and hiring of young workers are not necessarily symmetric. In the case of no discrimination, no specific patterns are expected in lay-off and hiring processes. The project will test these hypotheses by using Current Population Data (CPS) and O*Net data (that have employment/occupation information).