Equilibrium Screening and Categorical Inequality

American Economic Journal: Microeconomics

44 Pages Posted: 4 Mar 2020 Last revised: 18 Nov 2021

See all articles by Mogens Fosgerau

Mogens Fosgerau

University of Copenhagen

Rajiv Sethi

Barnard College, Columbia University; 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: November 17, 2021

Abstract

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

Fosgerau, Mogens and Sethi, Rajiv and Weibull, Jorgen W., Equilibrium Screening and Categorical Inequality (November 17, 2021). American Economic Journal: Microeconomics, 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)

Barnard College, Columbia University ( email )

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

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

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

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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