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The modern corporation as a safe haven for taste-based discrimination: An agency model of hiring decisions

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  • Méon, Pierre-Guillaume
  • Szafarz, Ariane

Abstract

This paper proposes a principal-agent model of labour market discrimination. In this model, the firm manager is a taste-based discriminator and has to make unobservable hiring decisions that determine the shareholder's profits, because workers differ in skill. The model shows that performance-based contracts may moderate the manager's propensity to discriminate, but that they are unlikely to fully eliminate discrimination. Moreover, the model predicts that sectors with high skill leverages discriminate less. Finally, the impacts of a wage gap between groups and of a diversity premium are investigated.

Suggested Citation

  • Méon, Pierre-Guillaume & Szafarz, Ariane, 2011. "The modern corporation as a safe haven for taste-based discrimination: An agency model of hiring decisions," Labour Economics, Elsevier, vol. 18(4), pages 487-497, August.
    • Handle: RePEc:eee:labeco:v:18:y:2011:i:4:p:487-497
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    Cited by:

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    2. Boris Hirsch & Steffen Mueller, 2014. "Firm leadership and the gender pay gap: do active owners discriminate more than hired managers?," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(1), pages 129-142, March.
    3. Isabelle Agier & Ariane Szafarz, 2013. "Subjectivity in credit allocation to micro-entrepreneurs: evidence from Brazil," Small Business Economics, Springer, vol. 41(1), pages 263-275, June.
    4. Agier, Isabelle & Szafarz, Ariane, 2013. "Microfinance and Gender: Is There a Glass Ceiling on Loan Size?," World Development, Elsevier, vol. 42(C), pages 165-181.
    5. Labie, Marc & Méon, Pierre-Guillaume & Mersland, Roy & Szafarz, Ariane, 2015. "Discrimination by microcredit officers: Theory and evidence on disability in Uganda," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 44-55.
    6. Merlino, Luca Paolo, 2012. "Discrimination, technology and unemployment," Labour Economics, Elsevier, vol. 19(4), pages 557-567.
    7. Sekkat, Khalid & Szafarz, Ariane & Tojerow, Ilan, 2015. "Women at the Top in Developing Countries: Evidence from Firm-Level Data," IZA Discussion Papers 9537, Institute of Labor Economics (IZA).
    8. Andrea Garnero, 2015. "Workforce diversity, productivity and wages in France: the role of managers vs. the proprietary structure of the firm," Working Papers CEB 15-039, ULB -- Universite Libre de Bruxelles.
    9. Ederington Josh & Minier Jenny & Jill Stowe C., 2019. "Risk and Discrimination," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(3), pages 1-14, July.
    10. Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2012. "Performance Pay and Ethnic Wage Differences in Britain," University of Cyprus Working Papers in Economics 06-2012, University of Cyprus Department of Economics.
    11. Mahmood Arai & Moa Bursell & Lena Nekby, 2011. "The Reverse Gender Gap in Ethnic Discrimination: Employer Priors against Men and Women with Arabic Names," Working Papers CEB 11-027, ULB -- Universite Libre de Bruxelles.
    12. Anastasia Cozarenco & Ariane Szafarz, 2024. "How to identify lending bias when the lender's goal is not profit?," Working Papers CEB 24-007, ULB -- Universite Libre de Bruxelles.
    13. Sophie Hennekam & Jonathan Peterson & Loubna Tahssain-Gay & Jean-Pierre Dumazert, 2021. "Recruitment discrimination: how organizations use social power to circumvent laws and regulations," Post-Print hal-03497498, HAL.
    14. Sophie Hennekam & Jonathan Peterson & Loubna Tahssain-Gay & Jean-Pierre Dumazert, 2019. "Recruitment discrimination: how organizations use social power to circumvent laws and regulations," Post-Print hal-03232777, HAL.
    15. Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2014. "Performance pay and ethnic earnings differences in Britain," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 798-823.
    16. Sait Bayrakdar & Andrew King, 2022. "Job Satisfaction and Sexual Orientation in Britain," Work, Employment & Society, British Sociological Association, vol. 36(1), pages 21-39, February.
    17. Julien Picault, 2023. "A strategic approach to managerial compliance with equal pay policies," SN Business & Economics, Springer, vol. 3(8), pages 1-21, August.
    18. Drori, Israel & Manos, Ronny & Santacreu-Vasut, Estefania & Shoham, Amir, 2020. "How does the global microfinance industry determine its targeting strategy across cultures with differing gender values?," Journal of World Business, Elsevier, vol. 55(5).

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    More about this item

    Keywords

    Discrimination Agency theory Hiring;

    JEL classification:

    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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