Endogenous Hierarchies Under Representational Concerns

36 Pages Posted: 9 Oct 2011

See all articles by Debipriya Chatterjee

Debipriya Chatterjee

University of Wisconsin - Milwaukee

Glenn C. Loury

Brown University - Department of Economics; Brown University - Watson Institute for International and Public Affairs

Date Written: March 2, 2011

Abstract

This paper examines the following question: how do representational concerns affect a firm's hierarchical structure? Employers, facing a population of agents who can be distinguished by their productivity and identity, seek to assign them to positions in the organizations hierarchy that differ their sensitivity of output to productivity. It is observed that historically under-privileged workers feature predominantly in the lower ranks and earn systematically less in aggregate wages. It is shown that affirmative action like policies that are intended to reduce wage inequality, induce employers to adopt assignment policies that are more group egalitarian and choose an organizational hierarchy that is "flatter" than under Laissez-faire.

Keywords: hierarchy, affirmative action, mechanism design

JEL Classification: D2, D6, D8, J15, J16, J7

Suggested Citation

Chatterjee, Debipriya and Loury, Glenn C., Endogenous Hierarchies Under Representational Concerns (March 2, 2011). Available at SSRN: https://ssrn.com/abstract=1941014 or http://dx.doi.org/10.2139/ssrn.1941014

Debipriya Chatterjee (Contact Author)

University of Wisconsin - Milwaukee ( email )

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Glenn C. Loury

Brown University - Department of Economics ( email )

64 Waterman Street
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United States

Brown University - Watson Institute for International and Public Affairs ( email )

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