The representation dynamic and the “normalization” of group differences

Abstract

Abstract Intergroup inequality has been linked to differing norms of economic participation among groups. We present a theory of endogenous identity-specific norms in which the larger a group’s representation in an economic activity, the more the activity is deemed “normal” or “appropriate” for its members. This representation dynamic can arise from behavioral heuristics or be created by informational technologies such as generative artificial intelligence. Through it, the economic underrepresentation of a group becomes “normalized,” resulting in more severe inequality than in standard models. Equality of opportunity almost never results in equal outcomes, even when groups have the same productivity. Minorities and historically marginalized groups tend to be underrepresented. However, minorities with greater productivity and/or weaker group identification can become overrepresented, and even dominant. When there are multiple career stages, underrepresentation can escalate at senior levels long after “glass ceilings” have disappeared. Underrepresentation disappears as economic returns rise and/or group identification weakens.