Testing for Pay and Promotion Bias in an International Organization

International organizations pursue multiple objectives in hiring policies including cultural diversity, reducing costs and avoiding discrimination among which there can be sharp trade-offs. The paper studies how these trade-offs are resolved in the World Bank's hiring processes. It estimates that half of salary and grade differentials between men and women and staff from high- and low-income countries are attributable to differences in productive characteristics. Alternative explanations for the remainder are explored, including omitted variable bias, quotas and discrimination. It is argued that the first two are not compelling explanations. Discrimination probably exists, though less than would be implied by a cost minimizing hiring policy.