Costly Screening and Categorical Inequality

40 Pages Posted: 4 Mar 2020 Last revised: 9 Nov 2020

See all articles by Mogens Fosgerau

Mogens Fosgerau

University of Copenhagen

Rajiv Sethi

Columbia University, Barnard College - Department of Economics; Santa Fe Institute

Jorgen W. Weibull

Stockholm School of Economics - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 23, 2020

Abstract

We consider a rationally inattentive screener who evaluates a pool of candidates composed of distinct and observable social categories. There is heterogeneity across categories in the costs of being screened, the degree of bias faced in the screening process, and the costs of investment in skills. Candidates choose how much effort to invest before being screened, with a payoff in a post-screening market that depends on the screening outcome. We characterize equilibrium in this model, and use it to unify and extend several strands in the literature on categorical inequality, including statistical discrimination, prejudice, and social capital.

Keywords: Categorical Inequality, Statistical Discrimination, Identity, Rational Inattention, Bregman information

JEL Classification: D8, D9, J15, J7

Suggested Citation

Fosgerau, Mogens and Sethi, Rajiv and Weibull, Jorgen W., Costly Screening and Categorical Inequality (October 23, 2020). Available at SSRN: https://ssrn.com/abstract=3533952 or http://dx.doi.org/10.2139/ssrn.3533952

Mogens Fosgerau

University of Copenhagen ( email )

University of Copenhagen, Building 26
Ă˜ster Farimagsgade 5
Copenhagen K., DK-1353
Denmark

Rajiv Sethi (Contact Author)

Columbia University, Barnard College - Department of Economics ( email )

3009 Broadway
New York, NY 10027
United States
212-854-5140 (Phone)

HOME PAGE: http://www.columbia.edu/~rs328/

Santa Fe Institute

1399 Hyde Park Road
Santa Fe, NM 87501
United States

Jorgen W. Weibull

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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