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Diversity in the Workplace

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Author Info
Felix J. J. Vardy
John Morgan

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Abstract

We study a model where an employer, trying to fill a vacancy, engages in optimal sequential search by drawing from two subpopulations of candidates who differ in their "discourse systems": during an interview, a minority candidate with a discourse system not shared with the employer conveys a noisier unbiased signal of ability than does a majority candidate. We show that, when the employer is "selective," minority candidates are underrepresented in the permanent workforce, fired at greater rates, and underrepresented among initial hires, even though the employer has no taste for discrimination and the populations are alike in their average ability. Furthermore, workplace diversity is increased if: (1) the cost of firing is reduced, (2) the cost of interviewing is increased, (3) the opportunity cost of leaving the position unfilled is increased, or (4) the prior probability that a candidate can perform the job is increased. Indeed, if the prior probability is sufficiently high, or the cost of firing sufficiently low, then minority candidates may be overrepresented in the permanent workforce.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/237.

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Length: 45 pages
Date of creation: 26 Oct 2006
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Handle: RePEc:imf:imfwpa:06/237

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Related research
Keywords: diversity ; sequential search ; statistical discrimination ; reverse discrimination ; discourse systems ; Employment ; Discriminatory practices ; Labor costs ;

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  4. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-33, April. [Downloadable!] (restricted)
  5. Lundberg, Shelly & Startz, Richard, 1998. "On the Persistence of Racial Inequality," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 292-323, April. [Downloadable!] (restricted)
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  6. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September. [Downloadable!] (restricted)
  7. Arrow, Kenneth J, 1998. "What Has Economics to Say about Racial Discrimination?," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 91-100, Spring. [Downloadable!] (restricted)
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  9. Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Information, Search, and Price Dispersion," Working Papers 2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  10. Rosen, Asa, 1997. "An equilibrium search-matching model of discrimination," European Economic Review, Elsevier, vol. 41(8), pages 1589-1613, August. [Downloadable!] (restricted)
  11. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-49, September. [Downloadable!] (restricted)
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  14. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213. [Downloadable!] (restricted)
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