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Diversity in the Workplace

  • Felix J. J. Vardy
  • John Morgan

We study a model where an employer, trying to fill a vacancy, engages in optimal sequential search by drawing from two subpopulations of candidates who differ in their "discourse systems": during an interview, a minority candidate with a discourse system not shared with the employer conveys a noisier unbiased signal of ability than does a majority candidate. We show that, when the employer is "selective," minority candidates are underrepresented in the permanent workforce, fired at greater rates, and underrepresented among initial hires, even though the employer has no taste for discrimination and the populations are alike in their average ability. Furthermore, workplace diversity is increased if: (1) the cost of firing is reduced, (2) the cost of interviewing is increased, (3) the opportunity cost of leaving the position unfilled is increased, or (4) the prior probability that a candidate can perform the job is increased. Indeed, if the prior probability is sufficiently high, or the cost of firing sufficiently low, then minority candidates may be overrepresented in the permanent workforce.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/237.

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Length: 45
Date of creation: 01 Oct 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/237
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  1. Susan Athey & Christopher Avery & Peter Zemsky, 1998. "Mentoring and Diversity," NBER Working Papers 6496, National Bureau of Economic Research, Inc.
  2. Marianne Bertrand & Sendhil Mullainathan, 2004. "Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination," American Economic Review, American Economic Association, vol. 94(4), pages 991-1013, September.
  3. Lang, Kevin, 1986. "A Language Theory of Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 363-82, May.
  4. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
  5. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  6. Rosen, Asa, 1997. "An equilibrium search-matching model of discrimination," European Economic Review, Elsevier, vol. 41(8), pages 1589-1613, August.
  7. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-40, December.
  8. Lundberg, S.J.Startz, R., 1994. "On the Persistence of Racial Inequality," Working Papers 94-07, University of Washington, Department of Economics.
  9. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  10. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 542-71, June.
  11. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical theories of discrimination in labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
  12. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-49, September.
  13. Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Information, Search, and Price Dispersion," Working Papers 2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  14. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-33, April.
  15. 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.
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