Economics of Discrimination: A Brief Review of Literature

Abstract

The survey of literature summarizes the key contributions on theoretical literature of economic discrimination. Three theories of discrimination are found in the economic literature: (1) neo-classical, which includes non-stochastic and stochastic versions; (2) institutional; and (3) Marxian. The neo-classical theory of discrimination is almost entirely a demand-side theory. Institutional theory of discrimination though it can be presented as an alternative to neo-classical theories, can also be viewed as a complementary attention to such factors as historical contexts, "pre-labour-market" discrimination against minorities, and a variety of societal factors. Marxists argue that because capitalism is based on gross inequality, it requires various tools to divide the majority like racism and all other forms of discrimination. The present article confines itself to the theoretical literature of economic (primarily labour market) discrimination.