A new GLO Discussion Paper indicates that introducing a hypothetical wage penalty for discriminatory choice behavior lowers discrimination and that higher penalties have a greater effect.

GLO Discussion Paper No. 856, 2021

Loss aversion in taste-based employee discrimination: Evidence from a choice experiment – Download PDF
by Lippens, Louis & Baert, Stijn & Derous, Eva

GLO Fellow Stijn Baert

Author Abstract: Using a choice experiment, we test whether taste-based employee discrimination against ethnic minorities is susceptible to loss aversion. In line with empirical evidence from previous research, our results indicate that introducing a hypothetical wage penalty for discriminatory choice behaviour lowers discrimination and that higher penalties have a greater effect. Most notably, we find that the propensity to discriminate is significantly lower when this penalty is loss-framed rather than gain-framed. From a policy perspective, it could therefore be more effective to financially penalise taste-based discriminators than to incentivise them not to discriminate.

GLO Discussion Papers are research and policy papers of the GLO Network which are widely circulated to encourage discussion. Provided in cooperation with EconStor, a service of the ZBW – Leibniz Information Centre for Economics, GLO Discussion Papers are among others listed in RePEc (see IDEAS,  EconPapers). Complete list of all GLO DPs – downloadable for free.

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