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Marianne Bertrand, Sendhil Mullainathan

Cited by*: 20 Downloads*: 31

We perform a field experiment to measure racial discrimination in the labor market. We respond with fictitious resumes to help-wanted ads in Boston and Chicago newspapers. To manipulate perception of race, each resume is assigned either a very African American sounding name or a very White sounding name. The results show significant discrimination against African-American names: White names receive 50 percent more callbacks for interviews. We also find that race affects the benefits of a better resume. For White names, a higher quality resume elicits 30 percent more callbacks whereas for African Americans, it elicits a far smaller increase. Applicants living in better neighborhoods receive more callbacks but, interestingly, this effect does not differ by race. The amount of discrimination is uniform across occupations and industries. Federal contractors and employers who list Equal Opportunity Employer' in their ad discriminate as much as other employers. We find little evidence that our results are driven by employers inferring something other than race, such as social class, from the names. These results suggest that racial discrimination is still a prominent feature of the labor market.

Marianne Bertrand, Dean S Karlan, Sendhil Mullainathan, Eldar Shafir, Jonathan Zinman

Cited by*: 7 Downloads*: 23

Numerous laboratory studies find that minor nuances of presentation and description change behavior in ways that are inconsistent with standard economic models. How much do these context effect matter in natural settings, when consumers make large, real decisions and have the opportunity to learn from experience? We report on a field experiment designed to address this question. A South African lender sent letters offering incumbent clients large, short-term loans at randomly chosen interest rates. The letters also contained independently randomized psychological "features" that were motivated by specific types of frames and cues shown to be powerful in the lab, but which, from a normative perspective, ought to have no impact. Consistent with standard economics, the interest rate significantly affected loan take-up. Inconsistent with standard economics, some of the psychological features also significantly affected take-up. The average effect of a psychological manipulation was equivalent to a one half percentage point change in the monthly interest rate. Interestingly, the psychological features appear to have greater impact in the context of less advantageous offers and persist across different income and education levels. In short, even in a market setting with large stakes and experienced customers, subtle psychological features appear to be powerful drivers of behavior. The findings pose a challenge for the social sciences: they suggest that psychological nuance matters but may be inherently difficult to predict given the impact of context. Successful incorporation of psychological features into field studies is likely to prove a vital, but nontrivial, addition to the formation of more general theories on when, why, and how frames and cues influence important decisions.

Marianne Bertrand, Simeon Djankov, Rema Hanna, Sendhil Mullainathan

Cited by*: 9 Downloads*: 14

We follow 822 applicants through the process of obtaining a driver's license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to one of three groups: bonus, lesson, and comparison groups. Participants in the bonus group were offered a financial reward if they could obtain their license fast; participants in the lesson group were offered free driving lessons. To gauge driving skills, we performed a surprise driving test after participants had obtained their licenses. Several interesting facts regarding corruption emerge. First, the bureaucracy responds to individual needs. Those who want their license faster (e.g. the bonus group), get it 40% faster and at a 20% higher rate. Second, the bureaucracy is insensitive to social needs. The bonus group does not learn to drive safely in order to obtain their license: in fact, 69% of them were rated as "failures" on the independent driving test. Those in the lesson group, despite superior driving skills, are only slightly more likely to obtain a license than the comparison group and far less likely (by 29 percentage points) than the bonus group. Detailed surveys allow us to document the mechanisms of corruption. We find that bureaucrats arbitrarily fail drivers at a high rate during the driving exam, irrespective of their ability to drive. To overcome this, individuals pay informal "agents" to bribe the bureaucrat and avoid taking the exam altogether. An audit study of agents further highlights the insensitivity of agents' pricing to driving skills. Together, these results suggest that bureaucrats raise red tape to extract bribes and that this corruption undermines the very purpose of regulation.