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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. 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.
    3. Khalid Sekkat & Ariane Szafarz & Ilan Tojerow, 2015. "Women at the Top in Developing Countries: Evidence from Firm-Level Data," Working Papers CEB 15-048, ULB -- Universite Libre de Bruxelles.
    4. 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.
    5. 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.
    6. 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.
    7. 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).
    8. 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.
    9. Merlino, Luca Paolo, 2012. "Discrimination, technology and unemployment," Labour Economics, Elsevier, vol. 19(4), pages 557-567.
    10. 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.
    11. Colin Green & John Heywood, 2012. "Don't Forget the Gravy! Are Bonuses and Time Rates Complements?," Working Papers 13424023, Lancaster University Management School, Economics Department.
    12. 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.

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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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