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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.

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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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  17. Marianne Bertrand & Sendhil Mullainathan, 2003. "Are Emily and Greg More Employable than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination," NBER Working Papers 9873, National Bureau of Economic Research, Inc.
  18. Prendergast, Canice & Topel, Robert, 1993. "Discretion and bias in performance evaluation," European Economic Review, Elsevier, vol. 37(2-3), pages 355-365, April.
  19. Ariane Szafarz, 2008. "An Alternative to Statistical Discrimination," ULB Institutional Repository 2013/14329, ULB -- Universite Libre de Bruxelles.
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  26. Page, Lionel & Page, Katie, 2010. "Last shall be first: A field study of biases in sequential performance evaluation on the Idol series," Journal of Economic Behavior & Organization, Elsevier, vol. 73(2), pages 186-198, February.
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Cited by:

  1. 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.
  2. Merlino, Luca Paolo, 2012. "Discrimination, technology and unemployment," Labour Economics, Elsevier, vol. 19(4), pages 557-567.
  3. Marc Labie & Pierre-Guillaume Méon & Roy Mersland & Ariane Szafarz, 2010. "Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda," Working Papers CEB 10-007.RS, ULB -- Universite Libre de Bruxelles.
  4. 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.
  5. 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.
  6. 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.
  7. Isabelle Agier & Ariane Szafarz, 2013. "Subjectivity in Credit Allocation to Micro-Entrepreneurs: Evidence from Brazil," ULB Institutional Repository 2013/148889, ULB -- Universite Libre de Bruxelles.
  8. Sekkat, Khalid & Szafarz, Ariane & Tojerow, Ilan, 2015. "Women at the Top in Developing Countries: Evidence from Firm-Level Data," IZA Discussion Papers 9537, Institute for the Study of Labor (IZA).

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