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Competition, Learning and Persistence in the Effects of Unmeritocratic Hiring Decisions

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  • Cooper, Peter

Abstract

Sometimes wide disparities in workers' earnings are defended as simply the meritocratic outcome of a competitive process. While inequalities due to discrimination or luck are admitted as temporary possibilities, it is frequently argued that competition and the profit motive will eliminate them in the longer term. In the present paper, this position is challenged. A model is developed to demonstrate that hiring errors can have persistent effects on individual workers' earnings under conditions of capitalist competition. Hiring errors give the beneficiaries opportunities to learn and improve in their new jobs, raising the possibility that their initial advantages can become locked in. The model shows how fundamental features of the capitalist system (competition, the profit motive, the free labour exchange) can reinforce, and not always eliminate, these early advantages. While the emphasis is on random error, the same factors will play a comparable role in perpetuating the effects of discriminatory hiring decisions.

Suggested Citation

  • Cooper, Peter, 2006. "Competition, Learning and Persistence in the Effects of Unmeritocratic Hiring Decisions," Working Papers 06-02.2, University of Sydney, School of Economics.
  • Handle: RePEc:syd:wpaper:2123/7657
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    File URL: http://hdl.handle.net/2123/7657
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    References listed on IDEAS

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    1. Darity, William A, Jr & Williams, Rhonda M, 1985. "Peddlers Forever? Culture, Competition, and Discrimination," American Economic Review, American Economic Association, vol. 75(2), pages 256-261, May.
    2. W. Lee Hansen, 1967. "Introduction," Journal of Human Resources, University of Wisconsin Press, vol. 2(3), pages 291-292.
    3. Mason, Patrick L, 1999. "Male Interracial Wage Differentials: Competing Explanations," Cambridge Journal of Economics, Oxford University Press, vol. 23(3), pages 261-299, May.
    4. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
    5. Mason, Patrick L, 1995. "Race, Competition and Differential Wages," Cambridge Journal of Economics, Oxford University Press, vol. 19(4), pages 545-567, August.
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