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

Labour Economics, Vol. 18, No. 4, pp. 487–497, 2011

Posted: 22 Dec 2010 Last revised: 29 Aug 2011

See all articles by Pierre-Guillaume Meon

Pierre-Guillaume Meon

Université Libre de Bruxelles (ULB); Université Robert Schuman Strasbourg III

Ariane Szafarz

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi

Date Written: October 1, 2010

Abstract

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.

Keywords: discrimination, agency theory, hiring

JEL Classification: J71, D21, M12, M51

Suggested Citation

Meon, Pierre-Guillaume and Szafarz, Ariane, The Modern Corporation as a Safe Haven for Taste-Based Discrimination: An Agency Model of Hiring Decisions (October 1, 2010). Labour Economics, Vol. 18, No. 4, pp. 487–497, 2011. Available at SSRN: https://ssrn.com/abstract=1729418

Pierre-Guillaume Meon

Université Libre de Bruxelles (ULB) ( email )

CP 132 Av FD Roosevelt 50
Brussels, Brussels 1050
Belgium

Université Robert Schuman Strasbourg III ( email )

47, Avenue de la Foret-Noire
Institut d'Etudes Politiques
67082 Strasbourg Cedex
France
33 3 88 41 77 21 (Phone)
33 3 88 41 77 78 (Fax)

Ariane Szafarz (Contact Author)

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi ( email )

50 Avenue Roosevelt
Brussels 1050
Belgium

Register to save articles to
your library

Register

Paper statistics

Abstract Views
324
PlumX Metrics