Equilibrium Screening and Categorical Inequality
American Economic Journal: Microeconomics
44 Pages Posted: 4 Mar 2020 Last revised: 18 Nov 2021
Date Written: November 17, 2021
We analyze equilibrium outcomes under costly screening of candidates from distinct categories. Candidates choose how much effort to invest in skill acquisition, and the screener decides how carefully to screen each candidate. Typically there are multiple equilibria, and ex ante identical individuals in different categories can receive different equilibrium treatment. The imposition of a quota for an initially disadvantaged group can result in increased screening intensity and skill investment by destabilizing the least active equilibrium. The endogeneity of screening enables powerful comparative statics, which we use to unify different strands in the literature on discrimination.
Keywords: Categorical Inequality; Statistical Discrimination; Costly Screening
JEL Classification: D8, D9, J15, J7
Suggested Citation: Suggested Citation