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Pay and grade differentials at the World Bank

Listed author(s):
  • Filmer, Deon
  • Grosh, Margaret
  • King, Elizabeth
  • van de Walle, Dominique

Large international organizations such as the World Bank pursue many objectives in hiring policies, including reduced costs, cultural diversity, and the avoidance of discrimination. There can be sharp tradeoffs between these objectives. Diversity is enhanced by recruiting from an international labor market, for example, but international organizations face unusually large differences in reservation wages for staff capable of doing the same work. One way to reduce costs would be to pay employees their reservation wages, which implies unequal pay for equal work, or discrimination. The authors show how these tradeoffs are resolved in the World Bank's hiring processes. They estimate disparities in salary and grades between men and women and by country of origin that cannot be attributed to differences in the productive characteristics of workers. The results indicate that about half the salary and grade differentials between men and women and staff from high- and low-income countries are attributable to differences in worker characteristics. They explore a number of alternative explanations for the rest of the salary and grade differentials, including omitted-variable bias, quotas imposed to ensure diversity, and discrimination in hiring and promoting. They argue that neither omitted-variable bias nor quotas are compelling explanations for disparities, and that discrimination probably exists, although certainly less than would be implied by a cost-minimizing hiring policy. A shift seems to be occurring in the hiring process of the Bank, possibly because 1) the application pool, including women and Part II nationals (from developing countries) has significantly improved in quality; 2) information gathering during hiring has intensified, decreasing guesswork; 3) there is more incentive to staff from minority groups; and 4) the Bank's increasing diversity in terms of gender and nationality groups is more conducive to high performance by the people against whom there may previously have been bias.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1912.

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Date of creation: 30 Apr 1998
Handle: RePEc:wbk:wbrwps:1912
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  1. Griliches, Zvi & Mason, William M, 1972. "Education, Income, and Ability," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 74-103, Part II, .
  2. Jones, David R & Makepeace, Gerald H, 1996. "Equal Worth, Equal Opportunities: Pay and Promotion in an Internal Labour Market," Economic Journal, Royal Economic Society, vol. 106(435), pages 401-409, March.
  3. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
  4. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  5. repec:fth:prinin:353 is not listed on IDEAS
  6. Lazear, Edward P & Rosen, Sherwin, 1990. "Male-Female Wage Differentials in Job Ladders," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 106-123, January.
  7. Cotton, Jeremiah, 1988. "On the Decomposition of Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 236-243, May.
  8. David Neumark, 1988. "Employers' Discriminatory Behavior and the Estimation of Wage Discrimination," Journal of Human Resources, University of Wisconsin Press, vol. 23(3), pages 279-295.
  9. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
  10. Jacqueline Berger, 1995. "Were You Referred By a Man or a Woman? Gender of Contracts and Labor Market Outcomes," Working Papers 732, Princeton University, Department of Economics, Industrial Relations Section..
  11. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-946, December.
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