Efficiency Wages, Tournaments, and Discrimination: A Theory of Employment Discrimination Law for 'High-Level' Jobs

Abstract:     
This paper analyzes the effects of discrimination law on discrimination in allocating "high-level" jobs. These are jobs characterized by substantial periods of training, high skill levels, and discretion (low or moderate monitoring). The analysis considers the incentives that an employer's hiring and promotion discrimination would create job applicants and workers who choose various career "strategies," based on preferences, skills and perceived opportunities. Applicants or workers who face discrimination alter their career strategies in ways that support the rationality of continued firm discrimination and that lead to an under-investment in human capital. The current legal rules against discrimination are largely ineffective in dealing with discrimination of this type; the analysis suggests, therefore, that the legal regime as applied to "high-level" jobs should be abandoned or substantially modified.

JEL Classification: J71, K31

working papers series