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Diversity in the Workplace

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  • Mr. Felix J Vardy
  • Mr. John Morgan

Abstract

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.

Suggested Citation

  • Mr. Felix J Vardy & Mr. John Morgan, 2006. "Diversity in the Workplace," IMF Working Papers 2006/237, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2006/237
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    References listed on IDEAS

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    Cited by:

    1. Lepage, Louis Pierre, 2021. "Endogenous learning, persistent employer biases, and discrimination," CLEF Working Paper Series 34, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    2. Esther Hauk & Hannes Mueller, 2015. "Cultural Leaders and the Clash of Civilizations," Journal of Conflict Resolution, Peace Science Society (International), vol. 59(3), pages 367-400, April.
    3. Deepak Hegde & Justin Tumlinson, 2014. "Does Social Proximity Enhance Business Partnerships? Theory and Evidence from Ethnicity's Role in U.S. Venture Capital," Management Science, INFORMS, vol. 60(9), pages 2355-2380, September.
    4. Neilson, William & Ying, Shanshan, 2016. "From taste-based to statistical discrimination," Journal of Economic Behavior & Organization, Elsevier, vol. 129(C), pages 116-128.
    5. Feng Li & Venky Nagar, 2013. "Diversity and Performance," Management Science, INFORMS, vol. 59(3), pages 529-544, September.
    6. Hoogendoorn, Sander M. & van Praag, Mirjam C., 2012. "Ethnic Diversity and Team Performance: A Field Experiment," IZA Discussion Papers 6731, Institute of Labor Economics (IZA).
    7. Conde-Ruiz, J. Ignacio & Ganuza, Juan José & Profeta, Paola, 2022. "Statistical discrimination and committees," European Economic Review, Elsevier, vol. 141(C).
    8. Darwin Joseph R. & Palanisamy Chinnathambi Selvaraj, 2015. "The Effects of Work Force Diversity on Employee Performance in Singapore Organisations," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 6(2), pages 17-29, March.
    9. Luca Flabbi & Mario Macis & Andrea Moro & Fabiano Schivardi, 2019. "Do Female Executives Make a Difference? The Impact of Female Leadership on Gender Gaps and Firm Performance," The Economic Journal, Royal Economic Society, vol. 129(622), pages 2390-2423.
    10. Steinar Holden & Åsa Rosén, 2014. "Discrimination And Employment Protection," Journal of the European Economic Association, European Economic Association, vol. 12(6), pages 1676-1699, December.
    11. Bernhard Eckwert & Burkhard Drees & Felix Vardy, 2011. "Cheap Money and Risk Taking: Opacity versus Underlying Risk," EcoMod2011 2782, EcoMod.
    12. Lepage, Louis Pierre, 2020. "Endogenous learning and the persistence of employer biases in the labor market," CLEF Working Paper Series 24, Canadian Labour Economics Forum (CLEF), University of Waterloo.

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    More about this item

    Keywords

    WP; lower bound; Diversity; sequential search; statistical discrimination; reverse discrimination; discourse systems; minority candidate; majority candidate; decision problem; optimization problem; workplace diversity; Labor force; Unemployment; Unemployment rate; Labor markets; Europe; West Africa;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • 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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