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The Modern Corporation as a Safe Haven for Taste-Based Discrimination: An Agency Model of Hiring Decisions

  • Pierre-Guillaume Méon
  • Ariane Szafarz

This paper proposes a principal–agent model of labour market discrimination. In this model, the firm manager is a taste-based discriminator and has to make unobservable hiring decisions that determine the shareholder's profits, because workers differ in skill. The model shows that performance-based contracts may moderate the manager's propensity to discriminate, but that they are unlikely to fully eliminate discrimination. Moreover, the model predicts that sectors with high skill leverages discriminate less. Finally, the impacts of a wage gap between groups and of a diversity premium are investigated.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/88635.

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Date of creation: 2011
Date of revision:
Publication status: Published in: Labour economics (2011) v.18 n° 4,p.487-497
Handle: RePEc:ulb:ulbeco:2013/88635
Contact details of provider: Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles
Web page: http://difusion.ulb.ac.be

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  1. Marianne Bertrand & Sendhil Mullainathan, 2003. "Are emily and greg more employable than lakisha and jamal? A field experiment on labor market discrimination," Natural Field Experiments 00216, The Field Experiments Website.
  2. Page, Lionel & Page, Katie, 2010. "Last shall be first: A field study of biases in sequential performance evaluation on the Idol series," Journal of Economic Behavior & Organization, Elsevier, vol. 73(2), pages 186-198, February.
  3. Harry J. Holzer & Keith R. Ihlanfeldt, 1998. "Customer Discrimination And Employment Outcomes For Minority Workers," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 835-867, August.
  4. Marianne Bertrand & Sendhil Mullainathan, 2000. "Agents with and without Principals," Working Papers 809, Princeton University, Department of Economics, Industrial Relations Section..
  5. Danièle Meulders & Robert Plasman & Michele Cincera & Séverine Lemière & Stéphane Danis & Sile Padraigin O'Dorchai & Ilan Tojerow & Maria Jepsen & Amynah Vanessa Gangji & David Moreno & Maria Caprile , 2003. "Women in industrial research - Analysis of statistical data and good practices of companies," ULB Institutional Repository 2013/7728, ULB -- Universite Libre de Bruxelles.
  6. John S. Heywood & Daniel Parent, 2009. "Performance Pay and the White-Black Wage Gap," Cahiers de recherche 0916, CIRPEE.
  7. Marianne Bertrand & Kevin Hallock, 1999. "The Gender Gap in Top Corporate Jobs," Working Papers 805, Princeton University, Department of Economics, Industrial Relations Section..
  8. 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.
  9. Guido Friebel & Michael Raith, 2004. "Abuse of Authority and Hierarchical Communication," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 224-244, Summer.
  10. Prendergast, Canice & Topel, Robert, 1993. "Discretion and bias in performance evaluation," European Economic Review, Elsevier, vol. 37(2-3), pages 355-365, April.
  11. Marianne Bertrand & Sendhil Mullainathan, 2001. "Are Ceos Rewarded For Luck? The Ones Without Principals Are," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 901-932, August.
  12. Marianne Bertrand & Kevin F. Hallock, 2001. "The Gender Gap in Top Corporate Jobs," ILR Review, Cornell University, ILR School, vol. 55(1), pages 3-21, October.
  13. Rosen, A., 1998. "Search, Bargaining and Employer Discrimination," Papers 1998-13, Uppsala - Working Paper Series.
  14. 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.
  15. Coate, Stephen & Loury, Glenn, 1993. "Antidiscrimination Enforcement and the Problem of Patronization," American Economic Review, American Economic Association, vol. 83(2), pages 92-98, May.
  16. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  17. Laffont, Jean-Jacques, 1990. "Analysis of Hidden Gaming in a Three-Level Hierarchy," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 301-24, Fall.
  18. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  19. Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2009. "Social Connections and Incentives in the Workplace: Evidence from Personnel Data," CEPR Discussion Papers 7114, C.E.P.R. Discussion Papers.
  20. Krueger, Alan B, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 75-101, February.
  21. repec:ebl:ecbull:v:10:y:2008:i:5:p:1-6 is not listed on IDEAS
  22. David H. Autor & David Scarborough, 2008. "Does Job Testing Harm Minority Workers? Evidence from Retail Establishments," The Quarterly Journal of Economics, MIT Press, vol. 123(1), pages 219-277, 02.
  23. Herbert Glejser & Bruno Heyndels, 2001. "Efficiency and Inefficiency in the Ranking in Competitions: the Case of the Queen Elisabeth Music Contest," Journal of Cultural Economics, Springer, vol. 25(2), pages 109-129, May.
  24. Francine D. Blau & Lawrence M. Kahn, 2000. "Gender Differences in Pay," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 75-99, Fall.
  25. Ariane Szafarz, 2008. "An Alternative to Statistical Discrimination," ULB Institutional Repository 2013/14329, ULB -- Universite Libre de Bruxelles.
  26. Donna K. Ginther & Shulamit Kahn, 2004. "Women in Economics: Moving Up or Falling Off the Academic Career Ladder?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 193-214, Summer.
  27. John S. Heywood & Patrick L. O’Halloran, 2005. "Racial Earnings Differentials and Performance Pay," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
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