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Diversity in the Workplace

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  • Felix J. J. Vardy
  • John Morgan

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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Bibliographic Info

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

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Length: 45
Date of creation: 01 Oct 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/237

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Keywords: Employment; probability; unequation; unemployment rates; probabilities; statistic; random variable; prediction; predictions; generating function; outliers; normal distribution; unemployed; outlier; employment experiences; employment protection; statistical theory; high unoptimization; high youth unyouth unemployment market; survey; algebra; job search; statistical theories; unemployment rate;

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References

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  1. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 69, pages 213.
  2. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, Econometric Society, vol. 58(5), pages 1121-49, September.
  3. Lundberg, Shelly & Startz, Richard, 1998. "On the Persistence of Racial Inequality," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 16(2), pages 292-323, April.
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  9. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(3), pages 542-71, June.
  10. Lang, Kevin, 1986. "A Language Theory of Discrimination," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(2), pages 363-82, May.
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  12. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, American Economic Association, vol. 62(4), pages 659-61, September.
  13. Marianne Bertrand & Sendhil Mullainathan, 2004. "Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination," American Economic Review, American Economic Association, American Economic Association, vol. 94(4), pages 991-1013, September.
  14. Kenneth J. Arrow, 1998. "What Has Economics to Say about Racial Discrimination?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(2), pages 91-100, Spring.
  15. Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Information, Search, and Price Dispersion," Working Papers, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy 2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
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Cited by:
  1. Esther Hauk & Hannes Mueller, 2010. "Cultural Leaders and the Clash of Civilizations," Working Papers 481, Barcelona Graduate School of Economics.
  2. Sander Hoogendoorn & Mirjam van Praag, 2012. "Ethnic Diversity and Team Performance: A Field Experiment," Tinbergen Institute Discussion Papers 12-068/3, Tinbergen Institute, revised 01 May 2014.
  3. repec:dgr:uvatin:2012068 is not listed on IDEAS

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