Ethnic Discrimination: Lessons from the Israeli Online Market for Used Cars

Abstract

Using a combination of randomised field experiments, follow-up telephone surveys and other data collection efforts, this article studies the extent and the sources of ethnic discrimination in the Israeli online market for used cars. We find robust evidence of discrimination against Arab buyers and sellers which, the analysis suggests, is motivated by 'statistical' rather than 'taste' considerations. We additionally find that Arab sellers manipulate their ethnic identity in the market by leaving the name field in their advertisements blank.The study of discrimination against minorities in the marketplace has received great deal of attention by economists in recent decades. There are two leading explanations for discriminatory behaviour in markets. The first, introduced in the seminal contribution of Becker (1957), focuses on 'taste-based discrimination', or personal prejudice, of economic agents who dislike associating with individuals of a given gender, race or ethnicity. In Becker's model the strength of an agent's aversion to cross-group contact is expressed as the price the agent would demand to compensate her or him for such interactions. Thus, for example, a prejudiced white employer would hire a black worker only if this worker receives a sufficiently lower wage than an equally productive white worker.The second leading theory of discrimination, due to Arrow (1972Arrow ( , 1973 and Phelps (1972), focuses on 'statistical discrimination'. According to this theory discriminatory behaviour is the result of (actual or perceived) differences across groups in aggregate characteristics. The decision-maker uses these differences to evaluate some outcome-relevant individual characteristics, which are not easily observable. Thus, for instance, a non-prejudiced employer facing two job applicants, one black and one white will prefer to hire the white applicant if he or she believes that white workers are on average more productive than black workers.

Effect of neighborhood stigma on economic transactions

“…Audits have previously been used in research on discrimination in service provision, housing, and job applications (23)(24)(25)(26). Recent analyses have studied racial discrimination in online markets (27)(28)(29)(30)(31), but the method has not yet been applied to test for the effects of neighborhood stigma in economic transactions.…”

The Provocative Effect of Law: Majority Nationalism and Minority Discrimination

“…This has been shown to be the case especially in the context of Jewish‐Arab relations. For instance, Zussman () reports that more than half of his sample of Israeli Jews did not want to have Arab Israelis as neighbors. Enos and Gidron (forthcoming) report even more striking expressions of discrimination: around 30 percent of secular Jews in their sample, and more than half of the Ultra‐Orthodox in their sample, would prefer not to have Arabs citizens in the country.…”

An Introduction to Audit Studies in the Social Sciences

“…Some researchers have followed-up with employers to administer implicit association tests (IATs) to examine the connection between implicit bias and discrimination (Agerström and Rooth 2011;Rooth 2010). Other researchers have followed-up with surveys or interviews after an audit to attempt to better understand the reasons behind discriminatory actions (Bonnet et al 2016;Midtbøen 2014Midtbøen , 2015Midtbøen , 2016Zussman 2013). Although institutional review boards (IRBs) may be hesitant to allow researchers to engage in multiple points of contact with audit participants, some researchers have successfully…”