Economic Consequences and the Motive to Discriminate

Abstract

Past research indicates that increasing the economic consequences of evaluations should theoretically discourage discrimination by making it more costly. I theorize that such consequences may also encourage discrimination in settings in which evaluators may be motivated by performance expectations, e.g., stereotypes. I explore this theory using data from an online lending platform whose loan guarantee policy reduced the potential economic consequences of using borrowers’ demographics during lending decisions. I find evidence that with the policy in place, lenders evaluated female borrowers less favorably than male borrowers. This finding is consistent with the theory that the policy discouraged performance-motivated discrimination (that driven by beliefs about performance abilities) and simultaneously encouraged consumption-motivated discrimination (that driven by a like or dislike of others because of their demographic traits). Because I theorize about underlying motives for discrimination, the insights developed here should apply to a wide range of types of discrimination that vary according to these motives, including classic taste-based discrimination, homophily-driven discrimination, statistical discrimination, and status-based discrimination. Economic consequences may therefore represent an important dynamic link between different types of discrimination.