Discrimination and Deterrence with Enforcer Liability

Abstract

Taste-based discrimination (i.e. discrimination due to racist preferences) receives more attention than statistical discrimination in the enforcement literature, because the latter allows enforcers to increase their “success rates.” I show here that when enforcers’ incentives can be altered via liabilities and rewards, all types of discrimination reduce deterrence. Moreover, adverse effects of statistical discrimination on deterrence are more persistent than similar effects due to taste-based discrimination. I identify crime minimizing liabilities and rewards when enforcers engage in racial discrimination and consider the robustness of the analysis in alternative settings.