Working Paper: NBER ID: w28503
Authors: Peter Hull
Abstract: Marginal outcome tests compare the expected effects of a decision on individuals who are of different races but at the same indifference point of the decision-maker. I present a simple formalization of how such tests can detect racial bias, defined as a deviation from accurate statistical discrimination. Namely, the tests can reject that the decision-maker ranks individuals according to some accurate prediction of a mandated outcome, given some unspecified race-inclusive information set. The frontier of marginal effects can furthermore rule out canonical taste-based discrimination. I relate this analysis to other interpretations of marginal outcome tests, other notions of racial discrimination, and recent identification strategies.
Keywords: racial bias; marginal outcome tests; decision-making; statistical discrimination
JEL Codes: C21; C36; J15; J71
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| marginal outcome tests (C52) | racial bias (J15) |
| deviations from accurate statistical discrimination (J79) | racial bias (J15) |
| marginal outcome tests (C52) | rejection of canonical taste-based discrimination (J79) |
| marginal treatment effects differ by race (J79) | presence of taste-based discrimination (J79) |
| slopes of MTE frontiers (C51) | insights into biased beliefs or statistical discrimination (J71) |
| biased beliefs (D91) | interpretation of marginal outcome tests (C52) |