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A Delegation Approach to Regulating Hiring Discrimination

Author

Listed:
  • Paolo Martellini
  • Guido Menzio

Abstract

We approach the design of anti-discriminatory labor market regulation as a delegation problem. A private firm (the agent) is repeatedly faced with the opportunity of hiring one among several applicants to fill its vacancies. The firm is biased against applicants from some demographic group, and it is neutral towards applicants from some other group. Applicants differ not only with respect to their demographic characteristics, but also with respect to the idiosyncratic quality of their match with firm. A benevolent and unbiased labor market authority (the principal) enacts a hiring regulation (a direct-revelation mechanism without transfers) in order to reduce the impact of the firm's bias on its hiring behavior. The hiring regulation is constrained by the fact that the quality of the match between any particular applicant and the firm is privately observed by the firm. We characterize the optimal mechanism.

Suggested Citation

  • Paolo Martellini & Guido Menzio, 2024. "A Delegation Approach to Regulating Hiring Discrimination," NBER Working Papers 32018, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32018
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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