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Firm level hiring policy with culturally biased testing

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  • Adrian Masters

Abstract

This paper explores the implications for labor market outcomes of systematic testing of applicants in the hiring process. A matching model in which productivity is a worker's private information is used. Both wages and hiring rates are endogenous. A minority is defined as a group for whom the test is less precise in identifying individual productivity. Welfare and employment outcomes across various hiring policies are compared. Simulations suggest that tests are typically too accurate so that in a laissez faire economy minority group members fair better than the majority group members. Rules requiring equity in hiring reverse this result.

Suggested Citation

  • Adrian Masters, 2004. "Firm level hiring policy with culturally biased testing," Discussion Papers 04-14, University at Albany, SUNY, Department of Economics.
  • Handle: RePEc:nya:albaec:04-14
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    File URL: http://www.albany.edu/economics/research/workingp/2004/ciweb.pdf
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    References listed on IDEAS

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    5. Larry Samuelson & George J. Mailath & Avner Shaked, 2000. "Endogenous Inequality in Integrated Labor Markets with Two-Sided Search," American Economic Review, American Economic Association, vol. 90(1), pages 46-72, March.
    6. Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-531, May.
    7. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
    8. David H. Autor & David Scarborough, 2004. "Will Job Testing Harm Minority Workers?," NBER Working Papers 10763, National Bureau of Economic Research, Inc.
    9. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
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    11. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 542-571, June.
    12. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    13. Masters, Adrian M, 1999. "Wage Posting in Two-Sided Search and the Minimum Wage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 809-826, November.
    14. Arrow, Kenneth J., 1973. "Higher education as a filter," Journal of Public Economics, Elsevier, vol. 2(3), pages 193-216, July.
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    Cited by:

    1. Adrian Masters, 2005. "Directed search without wage commitment: a new role for minimum wages and unions," 2005 Meeting Papers 347, Society for Economic Dynamics.
    2. William Blankenau & Gabriele Camera, 2006. "A Simple Economic Theory of Skill Accumulation and Schooling Decisions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 93-115, January.

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