Shelby Grossman and Dan Honig. “These are my People: Evidence from Lagos on the Determinants of Informal Price Discrimination.” pdf
This paper examines discrimination along ethnic, religious, and class lines in one-o interactions. In dense urban societies, exchanges with strangers where neither individual has any expectation of seeing the other again are the modal interaction, yet studies by political scientists of differential treatment within and across groups have focused on repeated interactions, where one might expect discriminatory motivations to be different. We conduct an audit experiment designed explicitly to imitate real one-o interactions in the housing and rice markets in one neighborhood of Lagos, Nigeria, and demonstrate the existence of discrimination on ethnic and class (though not religious) bases in spot transactions. We leverage the experimental set up to attempt to disentangle the mechanisms driving these results, and present evidence that this discrimination is based on taste-based preferences rather than solely attempts by sellers to maximize prot.
Nathaniel Leff, Jeffry Frieden, and Shelby Grossman. “Trust and Envy: The Political Economy of Business Groups in Developing Countries.” pdf
Diversified business groups play a major role in the economies of many developing countries. Business group members, often from the same communal, ethnic, or tribal group, have or develop inter-personal relations that make it easier to obtain information and monitor compliance related to transactions that require a strong measure of trust. This in-group cohesion facilitates profitable and productive economic activity. However, it can create resentment among other members of society who are barred from membership in a group that is, of necessity, exclusive. This envy can fuel a self-reinforcing cycle of societal hostility and group protectiveness that can deprive society of the economic benefits the groups can provide. There are several possible reactions such as ‘affirmative action’ programs that can slow or stop the cycle of envy and group vulnerability.