There’s strong evidence of racist sorting by people looking for a job (white job seekers often avoid working for black managers, and white workers quit their jobs more rapidly when a white manager is replaced with a black manager). A similar phenomenon is race discrimination by buyers.
Do buyers discriminate based on race? This column describes an experiment in the US that advertised iPods online from black and white sellers. Black sellers received fewer offers at lower prices, doing better in markets with competition amongst buyers and worse in high-crime markets. The authors find evidence of both statistical and taste-based discrimination. … [I]t appears that discrimination may not “survive” in the presence of significant competition among buyers. Furthermore, black sellers do worst in the most racially isolated markets and markets with high property crime rates, suggesting a role for statistical discrimination in explaining the disparity. (source)
The important question is indeed to what extent this “sorting” on the part of buyers is motivated by statistical discrimination or by taste-based discrimination:
- Statistical discrimination means that race is used as a proxy for unobservable negative characteristics, maybe in this case a judgment about the probability that black sellers will be happy with a marginally lower sales price, given their statistically higher rates of poverty. Or perhaps there’s distrust based on unclear statistical judgments about the risk of buying fake or stolen goods, meeting sellers in an inconvenient or dangerous neighborhoods, or dealing with unreliable sellers who might not complete the transaction.
- Taste-based discrimination occurs when people just don’t like dealing with black people for no particular reason apart from the difference in race.
The study cited above uses a number of clever ways to disentangle these two effects. For instance, the inclusion of white tattooed sellers, who also received fewer and lower purchase offers, suggesting that part of the differences are due to statistical discrimination. Another part, however, is just plain racism. Black sellers are at a significant disadvantage on average, and that’s due to both statistical and taste-based discrimination.
More on statistical discrimination here.