Working Paper: CEPR ID: DP18015
Authors: Elena S. Pikulina; Daniel Ferreira
Abstract: We propose a theory of subtle discrimination, defined as biased acts that cannot be objectively ascertained as discriminatory. We present a model in which candidates compete for a promotion. When choosing among equally qualified candidates, the principal subtly discriminates by breaking ties in favor of candidates from a particular group. Subtle discrimination matters because it affects decisions to invest in human capital. The model predicts that discriminated agents perform better in low-stakes careers while favored agents perform better in high-stakes careers. In equilibrium, firms are polarized: high-productivity firms strive to be “progressive” and have diverse top management teams, while low-productivity firms prefer to be “conservative” and have little diversity at the top.
Keywords: discrimination; human capital; firm-specific skills; promotion
JEL Codes: J71; M51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| principal's subtle bias (C92) | differential promotion probabilities (C69) |
| differential promotion probabilities (C69) | investment decisions of red agents in high-stakes environments (G11) |
| subtle discrimination (J79) | investment decisions of red agents in high-stakes environments (G11) |
| differential promotion probabilities (C69) | investment decisions of blue agents in high-stakes environments (G11) |
| subtle discrimination (J79) | investment decisions of blue agents in high-stakes environments (G11) |
| subtle discrimination (J79) | investment decisions of red agents in low-stakes environments (G11) |
| differential promotion probabilities (C69) | investment decisions of red agents in low-stakes environments (G11) |
| subtle discrimination (J79) | investment decisions of blue agents in low-stakes environments (G41) |
| differential promotion probabilities (C69) | investment decisions of blue agents in low-stakes environments (G41) |