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The modern corporation as a safe haven for taste-based discrimination: An agency model of hiring decisions

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  • Méon, Pierre-Guillaume
  • Szafarz, Ariane

Abstract

This paper proposes a principal-agent model of labour market discrimination. In this model, the firm manager is a taste-based discriminator and has to make unobservable hiring decisions that determine the shareholder's profits, because workers differ in skill. The model shows that performance-based contracts may moderate the manager's propensity to discriminate, but that they are unlikely to fully eliminate discrimination. Moreover, the model predicts that sectors with high skill leverages discriminate less. Finally, the impacts of a wage gap between groups and of a diversity premium are investigated.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 18 (2011)
Issue (Month): 4 (August)
Pages: 487-497

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Handle: RePEc:eee:labeco:v:18:y:2011:i:4:p:487-497

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Web page: http://www.elsevier.com/locate/labeco

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Keywords: Discrimination Agency theory Hiring;

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References

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Cited by:
  1. Isabelle Agier & Ariane Szafarz, 2013. "Subjectivity in credit allocation to micro-entrepreneurs: evidence from Brazil," Small Business Economics, Springer, Springer, vol. 41(1), pages 263-275, June.
  2. Merlino, Luca Paolo, 2012. "Discrimination, technology and unemployment," Labour Economics, Elsevier, Elsevier, vol. 19(4), pages 557-567.
  3. Mahmood Arai & Moa B.M. Bursell & Lena Nekby, 2011. "The Reverse Gender Gap in Ethnic Discrimination: Employer Priors against Men and Women with Arabic Names," DULBEA Working Papers, ULB -- Universite Libre de Bruxelles 11-09, ULB -- Universite Libre de Bruxelles.
  4. Colin Green & John Heywood, 2012. "Don't Forget the Gravy! Are Bonuses and Time Rates Complements?," Working Papers 13424023, Lancaster University Management School, Economics Department.
  5. Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2012. "Performance Pay and Ethnic Wage Differences in Britain," University of Cyprus Working Papers in Economics, University of Cyprus Department of Economics 06-2012, University of Cyprus Department of Economics.

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