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Risk-Averse Managers, Labour Market Structures, Public Policies and Discrimination

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  • Picault Julien

    (Department of Economics, University of British Columbia – Okanagan, 3333 University Way, Kelowna, BC, Canada, V1V 1V7)

Abstract

This article presents a model to analyze the effects of first and second-moment statistical discrimination on the labour market. Second-moment statistical discrimination occurs when risk-averse managers make decisions regarding wage and hiring based on productivity variances. We provide a framework exploring managers’ discrimination based on differences in average productivity and in variance of productivity. Furthermore, since discrimination is composed of two types (wage and hiring discrimination), our model allows for the interdependence between hiring practices and wages. Using our model, we examine the effects of various anti-discrimination policies along with changes to the labour market structure. We show that managers’ behaviour may be driven by anti-discrimination policies and labour market structures. A firm reduces hiring when required to implement anti-discrimination policies to address wage inequality. A firm applying policies to promote employment equity must stimulate minority participation. A change in labour market structure does not alter the efficiency of policies promoting employment equity, but it does alter the efficiency of policies aimed at reducing wage differences.

Suggested Citation

  • Picault Julien, 2017. "Risk-Averse Managers, Labour Market Structures, Public Policies and Discrimination," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 17(1), pages 1-36, January.
    • Handle: RePEc:bpj:bejtec:v:17:y:2017:i:1:p:36:n:5
    DOI: 10.1515/bejte-2015-0079
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    References listed on IDEAS

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    1. Pierre Cahuc & Guy Laroque, 2014. "Optimal Taxation and Monopsonistic Labor Market: Does Monopsony Justify the Minimum Wage?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(2), pages 259-273, April.
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    4. David Bjerk, 2008. "Glass Ceilings or Sticky Floors? Statistical Discrimination in a Dynamic Model of Hiring and Promotion," Economic Journal, Royal Economic Society, vol. 118(530), pages 961-982, July.
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    8. Goldberg, Pinelopi Koujianou, 1996. "Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 622-654, June.
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    Cited by:

    1. Julien Picault, 2023. "A strategic approach to managerial compliance with equal pay policies," SN Business & Economics, Springer, vol. 3(8), pages 1-21, August.

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    More about this item

    Keywords

    second moment statistical discrimination; market structures; risk-aversion; public policies; first moment statistical discrimination;
    All these keywords.

    JEL classification:

    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • D20 - Microeconomics - - Production and Organizations - - - General

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