By Eric Crampton 15/01/2018

Danish kids are happy to pay to avoid having to work with someone of a different ethnicity. In this clever field experiment, Danish kids with traditionally Danish-sounding names were willing to forego expected earnings in order to avoid being paired with someone with a Muslim-sounding name – and vice-versa.

It’s a great experimental design. Kids do a first round stuffing envelopes on their own, paid a piece rate. For the second round, they have to choose a day to come in, and they’ll be partnered with another kid with a joint payoff for how much the team gets done. They’re given information on what the other kid achieved in the first round. Because the framing is choice of day to come in for the task rather than choice of partner (though the day determines the partner), there’s less chance that the participants would expect the experimenter to be inferring racial preference.
Team productivity in this task depends on the productivity of each of the workers in the prior round – there’s no diversity benefit or penalty. Of course it’s just envelope stuffing.
Preference-based discrimination is symmetric. Participants with Danish-sounding names were willing to pay to avoid being partnered with participants with Muslim-sounding names, and vice-versa.

The insignificant estimate on Danish-sounding indicates that the tendency to discriminate is not different across ethnic types, after controlling for differences in prices. We think that this is a remarkable result for two reasons. First, attention both in the literature and policy debates usually focuses on discrimination of the minority group by the majority group because members of the majority group are more often in the position to discriminate, and workers from the minority group tend to be disadvantaged. However, our results suggest that observing more frequent discrimination of minorities may simply be due to the fact that majority decision makers have more opportunities to discriminate rather than a stronger ethnic animus.

This too was interesting:

Second, this result highlights the importance of controlling for prices when measuring discrimination. From simply looking at discrimination percentages, a layperson may be misled to conclude that decision makers with Danish-sounding names are more likely to discriminate. In fact, decision makers with Danish-sounding names discriminate in 44 percent of the cases, while those with Muslim-sounding names do so in only 33 percent of the cases (however, p = 0.517, χ2 test). Yet, these differences do not reflect differences in animus because decision makers with Danish-sounding names face a lower price on average than decision makers with Muslim-sounding names (€5.2 versus €7.8, p = 0.078, KS). The reason is that workers with Danish-sounding names are systematically more productive (116 letters) in round 1 than participants with Muslim-sounding names (100 letters). According to regressions (2) and (4) in Table 3, these price differences explain the observed differences in taste-based discrimination across ethnic types (Danish-sounding is insignificant, but Price is significant).

They conclude:

Using a sample from Denmark, we find that discrimination is common even at a substantial price, that majority and minority groups are equally likely to discriminate for given prices, and that the demand for discrimination is highly elastic. Our best estimate is that the probability to discriminate falls by about 9 percent if the price of discrimination goes up by 10 percent.

Denmark may be more polarised than other places; would be very interesting to see this repeated elsewhere.

There are a host of interesting implications for policy, which the cautious blogger leaves as exercise for the reader. The elasticity of immigration restrictions with respect to the stringency of workplace diversity mandates or the legal status of repugnant homeowner covenants is one fun one to think about. Second best policy in a world of crooked timber….

Oh: Jean-Robert Tyran is one of the paper’s authors. He also wrote my most favourite ever experimental economics paper.