Abstract
Regarding market economies with imperfect information it is commonly presumed that more information leads to welfare-improving equilibria. In this view the use of sex or race as a free screening device reduces allocative inefficiencies in the economy. If a firm's hiring policy is hampered by problems of adverse selection, however, statistical discrimination may not be socially efficient. Particularly in case of slack labour markets or in tight labour markets with a relatively elastic supply of highly qualified members of the disfavoured worker group, statistical discrimination exacerbates allocative inefficiencies. Yet a socially efficient ban on discrimination may fail to increase the total income of disfavoured workers. In the presence of adverse selection, therefore, no simple trade-off exists between efficiency and equity effects of statistical discrimination.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
