Working Paper: NBER ID: w14464
Authors: Suzanne Scotchmer
Abstract: In a labor market hierarchy, promotions are affected by the noisiness of information about the candidates. I study the hypothesis that males are more risk taking than females, and its implications for rates of promotion and abilities of survivors. I define promotion hierarchies with and without memory, where memory means that promotion depends on the entire history of success. In both types of hierarchies, the surviving risk takers will have lower average ability whenever they have a higher survival rate. Further, even if more risk takers than non risk takers are promoted in the beginning of the hierarchy, that will be reversed over time. The risk takers will eventually have a lower survival rate, but higher ability. As a consequence of these differences, the various requirements of employment law cannot simultaneously be satisfied. Further, if promotion standards are chosen to maximize profit, the standards will reflect gender in ways that are difficult to distinguish from discriminatory intent.
Keywords: No keywords provided
JEL Codes: D63; J08
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| males' higher risk taking (G41) | higher initial promotion rate (J62) |
| higher initial promotion rate (J62) | lower average ability among promoted males (J62) |
| males' higher risk taking (G41) | lower survival rate among males (I12) |
| promotion standards in hierarchies without memory (J62) | depends solely on current performance (D29) |
| promotion standards in hierarchies with memory (J62) | depends on cumulative performance history (C29) |
| risk-taking behavior (D91) | noisiness of signals in promotion decisions (D80) |