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\begin{document}
\title[]{A political economy of social discrimination}
\author[]{Torun Dewan \\\bigskip Stephane Wolton }
\date[]{}
\frame{\titlepage}

\bf{What is discrimination?}
\begin{quote}
``Discrimination means that two individuals with similar economic characteristics experience unequal (economic, social, or political) outcomes as a result an individual's non-directly relevant factors such as race or sex." \\\vspace{0.6cm}
\end{quote}
Evaluation of an individual not based on what it can bring to firm/society, but their group belonging 
\end{frame}


\bf{Discrimination as a social phenomenon}
Discrimination requires that ``\tcs{\textbf{the relevant groups must be socially salient in that they structure interactions in important social contexts.}}'' (Altman's , "Discrimination", \textit{The Stanford Encyclopedia of Philosophy}) \\\vspace{0.6cm}
Discrimination is a social phenomenon (Allport, 1954) \\\vspace{0.6cm}
This opens the possibility for discrimination to be sustained by norms
\end{frame}

\bf{The case of Cagots in France}
\begin{quote}
``[T]he Cagots [of French and Spanish Pyren\'{e}es] were for a millennium treated as pariahs, relegated to disfavoured districts, even forced to use separate doors in churches, where they received the Communion water at the end of a stick.  Because contact with the Cagots was contaminating, they were severely punished for drinking from the same water basin as others, for farming, or even walking barefoot on the streets. (...) What distinguished them from others? Not their appearance. (That's why they were forced to identity themselves with badges pinned to their clothing...) No their family names. Not their language. Not their religion.'' \\\smallskip
{\raggedleft \normalfont Kwame Anthony Appiah (2018) \\}
\end{quote}
\end{frame}


\bf{The case of Burakumin in Japan}
\begin{quote}
``Burakumin are physically indistinguishable from other Japanese but have historically been regarded as a socially distinct group. When identified, they are often subject to discrimination and prejudice. '' (Wikipedia) \\\vspace{0.5cm}
\end{quote} 
Same situation for castes in India (Akerlof, 1976)
\begin{itemize}
\item \bigskip Extreme form of discrimination sustained by norms
\end{itemize}
\end{frame}

\bf{This paper}
We study the possibility of discrimination sustained by norms
\begin{itemize}
\item \medskip Social discrimination \\\vspace{0.5cm}
\end{itemize}
We show that social discrimination can arise despite no ex-ante differences in human capital 
\end{frame}

\bf{This paper (2)}
We also study the full economic and political consequences of social discrimination
\begin{itemize}
\item \medskip Effect on employment 
\item \medskip Impact on firm productivity, on economy as a whole
\item \medskip Consequences for redistribution \\\vspace{0.5cm}
\end{itemize}
We also analyze the causes of social discrimination
\begin{itemize}
\item \medskip Uncover conditions such that a majority of voters demand policies raising the social saliency of certain physical traits (e.g., burqa ban)
\end{itemize}
\end{frame}


\bf{Related literatures}
\textbf{Discrimination:} Becker (2010); Arrow et al. (1973); Phelps (1972); Goffman (1963)... \\\vspace{0.4cm}
\textbf{Identity as focal point:} Akerloff (1976); Bramoull\'{e} and Goyal (2016); Eeckhout (2006); Cavounidis and Lang (2014); \tcs{P\c{e}ski and Szentes (2013)}; ... \\\vspace{0.4cm}
\textbf{Identity and economic choices:} Akerlof and Kranton (2000); Austen-Smith and Fryer (2005); Eguia (2017); Schnakenberg (2013); ... \\\vspace{0.4cm}
\textbf{Identity and redistribution:} Levy (2004); Krasa and Polborn (2014); Xteferis and Matakos (2017, 2019); Shayo (2009); Grossman and Helpman (2018); ... 
\end{frame}


\title{Theoretical framework}
\author{}
\maketitle

\bf{Model}
Players:
\begin{itemize}
\item \medskip 2 candidates $A$ and $B$
\item \medskip Masses $1$ of workers/employers with social traits 
\begin{itemize}
\item \smallskip \normalsize Majority trait $M$
\item \smallskip \normalfont Minority trait $m$ 
\end{itemize}
\item \medskip All workers can vote, only $f\%$ of employers are citizens \\\vspace{0.5cm}
\end{itemize}
Two parts
\begin{enumerate}
\item \medskip Political ``market''
\item \medskip Labour market
\end{enumerate}
\end{frame}

\bf{Electoral model}
Candidates are office-motivated: $B>0$ only if in office \\\vspace{0.5cm}
Candidate $J$'s platform $p_j$ contains: 
\begin{itemize}
\item \medskip Proportional tax on income $\tau_J$ \\\medskip
Tax revenue uniformly redistributed to workers (with some deadweight loss)
\item \medskip Symbolic policy $d_J \in \{0,1\}$ \\\vspace{0.5cm}
\end{itemize}
Citizens vote sincerely after observing $p_A$ and $p_B$ 
\begin{itemize}
\item \medskip When indifferent, vote against symbolic policy ($d=1$) \\\vspace{0.5cm}
\end{itemize}
Platform implemented after election, before labour market
\end{frame}

\bf{Labour market}
Each employer/firm has one position: filled or open \\\vspace{0.4cm}
Unemployed worker and employer with open position get a chance to work together:
\begin{enumerate}
\item \medskip Undirected one-to-one matching
\item \medskip Match-specific productivity $\t$ revealed to both workers and employers (uniform $[0,1]$, iid per match)
\item \medskip Both need to agree to work together for position to become filled next period  \\\vspace{0.5cm}
\end{enumerate}
If position is filled, 
\begin{itemize}
\item \medskip Worker gets exogenous $w$, employer gets $\t-w$ 
\item \medskip Match persists with probability $\delta$
\end{itemize}

\end{frame}

\bf{Labour market per-period utility}
Employer:
\[U^F=\begin{cases}
(1-\tau)(\theta - w) & \text{ if position filled} \\
0 & \text{ if position open} 
\end{cases} \]
Worker:
\[U^W=\begin{cases}
(1-\tau)w + T(\tau) & \text{ if employed } \\
T(\tau) & \text{ if unemployed} 
\end{cases}
\] \\\vspace{0.4cm}
$T(\tau) = \big(\tau - \underbrace{\frac{\tau^{1+\lambda}}{1+\lambda}}_{deadweight~loss}\big) \overbrace{R}^{tax~base}$ \\\vspace{0.5cm}
Payoffs are discounted with discount factor $\beta \in (0,1)$
\end{frame}



\bf{Identity}
Employers and workers characterized by their social identity $s \in \{M,m,\emptyset\}$ \\\vspace{0.5cm}
Absent symbolic policy ($d=0$) identity is not socially salient 
\begin{itemize}
\item \medskip All workers/employers identity: $s=\emptyset$ \\\vspace{0.5cm}
\end{itemize}
With symbolic policy ($d=1$), identity becomes socially salient
\begin{itemize}
\item \medskip Workers/employers differentiated $s \in \{M,m\}$ \\\medskip
$\a^W$ workers have trait $M$ \\\medskip
$\a^F$ employers have trait $M$
\item \medskip Social identity observed before entering working relationship
\end{itemize}
\end{frame}

\bf{The transmission of social identity}
When salient, social identity is not fixed: Depends on social interactions \\\vspace{0.5cm}
In a working relationship between identity-$K$ employer and identity-$L$ worker ($K,L \in \{m,M\}^2$) upon break down 
\begin{itemize}
\item \medskip Employer acquires worker's identity w.p. $\rho^F \in (0,1]$ 
\item \medskip Worker acquires employer's identity w.p. $\rho^W \in (0,1]$ 
\end{itemize}
\end{frame}

\title{Labour market analysis}
\maketitle

\bf{Labour market w/o socially salient identity}
All actors are identical
\begin{itemize}
\item \medskip No discrimination possible \\\vspace{0.5cm}
\end{itemize}
Worker always agrees to enter working relationship \\\vspace{0.5cm}
Employer hires worker if and only if $\theta \geq \theta^{ND}$ 
\begin{itemize}
\item \medskip Threshold satisfies $\t^{ND}>w$ \\\vspace{0.5cm}
\end{itemize}
Intuition: Employers trade off
\begin{itemize}
\item \medskip Profit today
\item \medskip Risk of being stuck with relatively poor match tomorrow
\end{itemize}
\end{frame}

\bf{Labour market with socially salient identity}
Workers-employers can now condition work decision on social identity
\begin{itemize}
\item \medskip Discrimination possible \\\vspace{0.5cm}
\end{itemize}
Focus on fully segregated equilibrium
\begin{itemize}
\item \medskip Majority workers/employers only work with majority members \\\vspace{0.5cm}
\end{itemize}
Generally unique type of eq with discrimination
\end{frame}

\bf{Characteristics of labour discrimination}
Majority employers hire majority workers iff $\t \geq \t^D_M(\a^W,\a^F)$ \\\vspace{0.7cm}
Minority employers hire minority workers iff $\t \geq \t^D_m(\a^W,\a^F)$ \\\vspace{0.7cm}
More difficult to find adequate workers
\begin{itemize}
\item[$\Rightarrow$] \medskip Employers less picky: $\t^D_M<\t^{ND}$ and $\t^D_m<\t^{ND}$ 
\end{itemize}
\end{frame}

\bf{Is labour discrimination a best response?}
\tcs{1.} Majority employer must refuse to hire minority worker with highest productivity ($\t=1$)
\begin{itemize}
\item \bigskip Cost of being tainted ($s = m$) sufficiently large
\item \bigskip It must be harder to hire minority than majority workers
\item[$\Rightarrow$] \bigskip Proportion of majority worker sufficiently high: $\a^W \geq \underline{\a}^W(\a^F)$
\end{itemize}
\end{frame}

\bf{Is labour discrimination a best response?}
\tcs{2.} Majority worker must refuse to work for minority firm 
\begin{itemize}
\item \bigskip Cost of being tainted ($s = m$) sufficiently large
\item \bigskip It must be harder to be hired by minority than majority employers
\item[$\Rightarrow$] \bigskip Proportion of majority worker sufficiently low: $\a^W \leq \overline{\a}^W(\a^F)$
\end{itemize}
\end{frame}

\bf{Labour discrimination as a best response}
\includegraphics[scale=0.2]{Existence_paper.eps}
\end{frame}

\bf{The consequences of labour discrimination}
Labour discrimination possible only if hiring/being hired easier for majority \\\vspace{0.5cm}
Compared to majority workers, minority workers face
\begin{itemize}
\item \medskip Higher unemployment rate
\item \medskip Longer unemployment spell \\\vspace{0.4cm}
\end{itemize}
Compared to majority-owned firms, minority-owned firms have lower productivity
\begin{itemize}
\item \medskip $\t^D_m<\t^D_M$ \\\vspace{0.4cm}
\end{itemize}
\tcs{$\Rightarrow$} Large observable difference despite fully similar ex-ante 
\end{frame}



\title{Political analysis}
\maketitle

\bf{The primacy of politics}
So far, conditions for labour discrimination as mutual best response \\\vspace{0.5cm}
But labour discrimination requires social identity to be salient
\begin{itemize}
\item[$\Leftrightarrow$] \medskip Symbolic policy implemented \\\vspace{0.5cm}
\end{itemize}
Necessary to study political demand for symbolic policies
\begin{itemize}
\item \medskip Compare welfare in steady state with and w/o symbolic policy
\item \medskip Comparison across equilibria ($\neq$ within one equilibrium)
\end{itemize}
\end{frame}

\bf{Possible equilibrium platforms}
Multi-dimensional problem, yet candidates propose either 
\begin{enumerate}
\item \medskip Workers' preferred tax rate absent discrimination $\tau=\tau^D$ \\\smallskip
No symbolic policy $d=0$ 
\item \medskip  \tcr{Majority} worker's preferred tax rate \tcr{with} discrimination $\tau=\tau^D_M$ \\\smallskip
Symbolic policy $d=1$
\end{enumerate}
\end{frame}

\bf{The benefit and costs of symbolic policy for
majority workers}
\tcs{Benefit} of symbolic policy (and labour discrimination):
\begin{itemize}
\item \medskip Increased chances of being employed by majority firm \\\vspace{0.4cm}
\end{itemize}
\tcs{Cost} of symbolic policy:
\begin{itemize}
\item \medskip No possibility to work with minority employers
\item \medskip Lower tax revenues to be redistributed \\\vspace{0.4cm}
\end{itemize}
\tcs{$\Rightarrow$ Benefit $>$ Cost} only if
\only<1>{\begin{itemize}
\item \medskip Minority poorly economically integrated $\a^W<\a^F$ 
\item \medskip Sufficient deadweight loss of taxation
\end{itemize}}
\only<2>{\begin{itemize}
\item \medskip \alert{Minority poorly economically integrated $\a^W<\a^F$ }
\item \medskip Sufficiently high deadweight loss of taxation
\end{itemize}}
\end{frame}

\bf{Equilibrium discrimination}
\includegraphics[scale=0.2]{Discrimination_paper.eps}
\end{frame}

\bf{The spillover of symbolic policies}
Symbolic policy $\rightarrow$ labour discrimination $\rightarrow$ lower total production 
Majority workers more likely to be employed
\begin{itemize}
\item \medskip Tax rate decreases: $\tau^D_M<\tau^{ND}$ \\\medskip 
Despite smaller total revenue available \\\vspace{0.5cm}
\end{itemize}
Both effects combined
\begin{itemize}
\item[$\Rightarrow$]  \medskip Lower redistribution with symbolic policy
\item[$\Rightarrow$] \medskip Minority workers doubly hurts by symbolic policy
\begin{itemize}
\item[$\rightarrow$] \normalsize \smallskip Lower employment \textbf{and}
\item[$\rightarrow$] \normalsize \smallskip Lower safety net when they need it most 
\end{itemize}
\end{itemize}
\end{frame}

\bf{What if wages are endogenous?}
Suppose wages are determined by Nash bargaining process  \\\vspace{0.5cm}
Surplus over outside option (unemployment/open position) divided according to workers' bargaining power \\\vspace{0.5cm}
Workers/employers face limited liability constraint:
\begin{itemize}
\item \medskip Zero-profit condition for employers
\item \medskip Work for free for workers \\\vspace{0.5cm}
\end{itemize}
All results hold $+$
\begin{itemize}
\item \medskip Majority workers have higher wages with than without discrimination
\item \medskip Minority workers have lower wages with than without discrimination 
\end{itemize}
\end{frame}

\bf{What if wages are endogenous?}
~{\centering \includegraphics[scale=0.9]{Wage} \\}
\end{frame}


\title{Summary and discussion}
\maketitle

\bf{Summary}
Social discrimination has serious consequences on
\begin{itemize}
\item \medskip Employment patterns of minority workers
\item \medskip Productivity: gap between minority-owned and majority-owned firms 
\item \medskip Total production
\item \medskip Total income of minority members: lower labour market income and lower transfers \\\vspace{0.5cm}
\end{itemize}
But it also generates some winners: majority workers 
\begin{itemize}
\item \medskip There may be a demand for raising social salience of certain traits via symbolic policies
\end{itemize}
\end{frame}

\bf{Norms on the labor market}
Norm-based discrimination as a complement to taste-/belief-based discrimination \\\vspace{0.5cm}
Evidence of norms affecting labor market outcomes:
\begin{itemize}
\item \medskip Women in 19th/20th century in Europe and USA (Fawcett, 1892)
\item \medskip Black individuals until 1950s (Wright, 1986)
\item \medskip Indian agricultural workers (Oh, 2023)
\item \medskip Laboratory experiments (Li et al., 2011)
\end{itemize}
\end{frame}

\bf{Social discrimination: Possible remedies?}
Unlike taste-based and possibly belief-based discrimination, norm-based discrimination cannot be erased by market pressures 
\begin{itemize}
\item[$\Rightarrow$] \medskip Room for government intervention \\\vspace{0.5cm}
\end{itemize}
\tcs{Remedy 1:} Workplace affirmative action \\\vspace{0.5cm}
\tcs{Remedy 2:} Promote minority economic integration \\\vspace{0.5cm}
\tcs{Remedy 3:} Correcting misperception about minorities \\\vspace{0.5cm}
\tcs{Remedy 4:} Voting rights for new arrivals from minorities \\\vspace{0.5cm}
Are these remedies possible when social discrimination benefit many voters?
\end{frame}

\bf{Social discrimination as redistribution}
Norm-based discrimination is a redistribution from minority workers to majority workers at a cost to the economy as a whole 
\begin{itemize}
\item \medskip 19th century feminist Dall (1860): \\\smallskip
\textit{``Man has increased the natural difference in his own favor,
supposing that there be any such, by laws and customs which cripple woman''}
\item \medskip Sociologist Goffman (1963): \\\smallskip
\textit{``The stigmatization of those in certain racial, religious, and ethnic groups has apparently functioned as a means of removing these minorities from various avenues of competition."}
\end{itemize}
\end{frame}

\bf{Rethinking culture and economics}
Our paper: symbolic policies and economic situation not necessarily separated
\begin{itemize}
\item \medskip Economy $\rightarrow$ symbolic policy $\rightarrow$ redistribution \\\vspace{0.5cm}
\end{itemize}
Hence, Le Pen can attract blue-collars with
\begin{itemize}
\item \medskip Nativism (``Putting French first'') \textbf{and}
\item \medskip A 10\% tax cut  \\\vspace{0.5cm}
\end{itemize}
Donald J. Trump can attract blue-collars with
\begin{itemize}
\item \medskip Attacks against minorities (``Mexico sends rapists'') \textbf{and}
\item \medskip Tax cuts 
\end{itemize}

\end{frame}



\end{document}
