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Statistical Discrimination and the Efficiency of Quotas

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  • J. Ignacio Conde-Ruiz
  • Juan-José Ganuza
  • Paola Profeta

Abstract

We develop a statistical discrimination model a la Cornel and Welch (1996) where groups of workers (males-females) differ in the observability of their productivity signals. We assume that the informativeness of the productivity signals depends on the match between the potential worker and the interviewer: when both parties have similar backgrounds, the signal is likely to be more informative. Under this “homo-accuracy” bias, the group that is most represented in the evaluation committee generates more accurate signals, and, consequently, has a greater incentive to invest in human capital. This generates a discrimination trap. If, for some exogenous reason, one group is initially poorly evaluated (less represented into the evaluation committee), this translates into lower investment in human capital of individuals of such group, which leads to lower representation in the evaluation committee in the future, generating a persistent discrimination process. We explore this dynamic process and show that quotas may be effective to deal with this discrimination trap. In particular, we show that introducing a quota allows to reach a steady state equilibrium with a higher welfare than the one obtained in the decentralized equilibrium in which talented workers of the discriminated group decide not to invest in human capital.

Suggested Citation

  • J. Ignacio Conde-Ruiz & Juan-José Ganuza & Paola Profeta, 2017. "Statistical Discrimination and the Efficiency of Quotas," Working Papers 2017-04, FEDEA.
  • Handle: RePEc:fda:fdaddt:2017-04
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    Cited by:

    1. J. Ignacio Conde-Ruiz & Manu García & Manuel Yáñez, 2018. "Diversidad de Género en los Consejos: el caso de España tras la Ley de Igualdad," Studies on the Spanish Economy eee2018-29, FEDEA.
    2. PaolaProfeta, 2017. "Gender Quotas and Efficiency," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 15(02), pages 26-30, August.

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