What is the difference between taste-based discrimination and statistical discrimination?

Taste-based discrimination and statistical discrimination are two different concepts in economics, particularly in labor economics.

1. Taste-Based Discrimination: This type of discrimination is based on personal prejudices or preferences. It was first proposed by economist Gary Becker. According to this theory, some people are willing to pay a cost to avoid interacting with individuals from certain groups. For example, an employer might prefer not to hire individuals from a certain race or gender, not because they believe these individuals are less productive, but simply because they have a personal bias against them. This type of discrimination is irrational from an economic perspective, as it leads to less efficient outcomes.

2. Statistical Discrimination: This type of discrimination, on the other hand, is based on generalizations or stereotypes about certain groups. It occurs when decision makers use aggregate group characteristics to make decisions about individuals. For example, an employer might be less likely to hire a woman for a certain job not because of personal bias, but because they believe, based on statistical evidence, that women are more likely to leave the workforce to raise children. This type of discrimination can be economically rational, but it can also lead to unfair outcomes for individuals who do not conform to the stereotype.

In summary, the main difference between taste-based discrimination and statistical discrimination lies in the motivation behind the discrimination. Taste-based discrimination is driven by personal biases, while statistical discrimination is driven by stereotypes or generalizations about groups.