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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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Listed author(s):
  • 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.

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File URL: http://www.sciencedirect.com/science/article/pii/S0927537110001338
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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 18 (2011)
Issue (Month): 4 (August)
Pages: 487-497

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Handle: RePEc:eee:labeco:v:18:y:2011:i:4:p:487-497
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

Keywords: Discrimination Agency theory Hiring;

Other versions of this item:

Find related papers by 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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  19. Kenneth J. Arrow, 1998. "What Has Economics to Say about Racial Discrimination?," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 91-100, Spring.
  20. Danièle Meulders & Robert Plasman & Michele Cincera & Séverine Lemière & Stéphane Danis & Sile Padraigin O'Dorchai & Ilan Tojerow & Maria Jepsen & Amynah Vanessa Gangji & David Moreno & Maria Caprile , 2003. "Women in industrial research - Analysis of statistical data and good practices of companies," ULB Institutional Repository 2013/7728, ULB -- Universite Libre de Bruxelles.
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  23. Prendergast, Canice & Topel, Robert, 1993. "Discretion and bias in performance evaluation," European Economic Review, Elsevier, vol. 37(2-3), pages 355-365, April.
  24. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
  25. Marianne Bertrand & Sendhil Mullainathan, 2001. "Are CEOs Rewarded for Luck? The Ones Without Principals Are," The Quarterly Journal of Economics, Oxford University Press, vol. 116(3), pages 901-932.
  26. Marianne Bertrand & Sendhil Mullainathan, 2000. "Agents With and Without Principals," Working Papers 809, Princeton University, Department of Economics, Industrial Relations Section..
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Cited by:

  1. 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.
  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. 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.
  6. Merlino, Luca Paolo, 2012. "Discrimination, technology and unemployment," Labour Economics, Elsevier, vol. 19(4), pages 557-567.
  7. 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.
  8. 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.

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