The Foundation and Application of Disparate Impact Doctrine
Author: James J. Heckman
The goals of this project include (1) the development of models and methods for detecting discrimination due to disparate treatment and disparate impact; (2) the examination of the extension of disparate impact concepts developed in the labor market to broader markets and institutional settings like housing markets, more general consumer markets, and to testing in education; (3) a review and analysis of the empirical evidence on discrimination in many markets and institutional settings; (4) the development of models of skill formation and ability to determine where in the lifecycle interventions to eliminate disparity will be most effective; (5) an assessment of the consequences of ability in bargaining, labor markets and consumer markets; and (6) an examination of the incentive effects of disparate impact and treatment doctrine on skill and ability formation.
The first publication to result from this project was J. Heckman and R. Bornholz “Measuring Disparate Impacts and Extending Disparate-Impact Doctrine to Organ Transplantation,” 48 Perspectives in Biology and Medicine S95 (2005). In this paper, the authors examine Ian Ayres' discussion of alternative tests for discrimination. The paper starts by discussing disparate impact doctrine as it has evolved in the area of employment discrimination and goes on to present a more formal framework for analyzing racial disparity, developing the statistical properties of Ayres' “three tests.” Its conclusion is that Ayres extends disparate impact doctrine to new domains where traditional notions like “business necessity” are not clearly defined and that he advocates novel testing procedures that turn out to have no rigorous basis. A new framework of analysis is developed.
Work on disparities in skill formation has been proceeding, and has resulted in five new publications. The first of these is J. Heckman and D. Masterov,“The Productivity Argument for Investing in Young Children,” 29 Review of Agricultural Economics 446 (2007). In this paper, the authors present a case for investing in disadvantaged young American children. A large, and increasing, number of children are growing up in environments that do not meet their economic, social and psychological needs. These environments place children at risk for failure in social and economic life. While most literature on this topic treats these disparities as a failure of fairness or social justice, this paper makes a different argument. The authors present a convincing argument that investing in young children from disadvantaged environments is not only in the interest of social justice, but also makes sound business sense. Substantial evidence from economics, sociology and public policy studies suggests early interventions that partially remedy the effects of adverse early environments can have a high economic return relative to other policies. These returns will not only raise the economic and social welfare of the individuals directly affected, but through them, improve and enrich society at large.
In the second publication (J. Heckman, “The Economics, Technology and Neuroscience of Human Capability Formation,” 104 Proceedings of the National Academy of Sciences 13250 (2007), Heckman explores the effects of cognitive and non-cognitive skills on health outcomes. Cognitive and noncognitive skills affect the evolution of health capital through choices made by parents and children. People with greater self-control and conscientiousness are better able to manage their own health care. This paper has a developmental focus and suggests new channels of policy influence to remediate well documented health disparities. In particular, early childhood interventions that affect personality traits and cognitive skills that promote health may prove to be effective policy tools in preventing and curing disease.
A more technical treatment of the production of skill can be found in F. Cunha, J. Heckman, and S. Schennach, “Estimating the Technology of Cognitive and Noncognitive Skill Formation,” unpublished manuscript (under revision), University of Chicago, Department of Economics, presented at the Yale Conference on Macro and Labor Economics, May 5-7, 2006. In this paper, the authors formulate and estimate a model of the evolution of children’s cognitive and noncognitive skills as determined by parental investments at different stages of the life cycle. They estimate the elasticity of substitution between contemporaneous investments and inherited stocks of skills to assess the benefits of early investment in children compared with later investment. They develop a nonlinear factor analysis and use it to establish nonparametric identification of the technology of skill formation.
In “A New Framework for the Analysis of Inequality,” (F. Cunha and J. Heckman, Macroeconomic Dynamics, forthcoming) the authors explain how to improve on traditional studies of income inequality and social mobility by constructing counterfactuals. Counterfactuals can be used to determine what would happen to mobility or inequality if different policies or interventions were tried than the policies historically observed. The authors describe recent methodological advances that enable analysts to construct counterfactual distributions and separate heterogeneity (predictable variability across persons) from uncertainty. Using the tools reviewed here, analysts can determine how much inequality and mobility is forecastable at a given age and how much is due to unforecastable luck. These methods allow analysts to move beyond aggregate summary measures of inequality that are based on the anonymity postulate and determine which groups in an initial distribution are affected by a policy change and how they are affected.
Finally, in Borghans, et al. (2008), the authors attempt to apply techniques traditionally reserved for economic research to psychological phenomena and data. This collaboration between economics and psychology is part of the groundwork for a new research program on skill development that will attempt to bring the rigor of economic and econometric analysis to bear on the vast, untapped resources in psychology. As a concrete example, the authors relate a subset of personality traits to traditional economic parameters. They discuss the measurement, stability, and consequences of both cognitive ability and non-cognitive traits and summarize evidence for their respective predictive power in a variety of aspects of economic and social life. Finally, they show that non-cognitive traits are likely more malleable than intelligence over the life-course, substantiating their importance from a policy standpoint.
Summaries and findings
- High school graduation rate is a barometer of the health of American society
- Apr 1, 2008
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