The production effect of discrimination: A conceptual Investigation

Many psychologists and sociologists argue that majorities can regain lost self-esteem by using minority groups as ‘negative reference groups’ or ‘scapegoats’ in the workplace. Since workers' self-esteem directly affects the productivity of the firm, racial prejudice can be viewed as productive. Using this argument as a point of departure, the present paper concludes that this production effect of prejudice can make integrated workforces profitable even under perfect competition.