Subtle Discrimination

Abstract

We introduce the concept of subtle discrimination—biased acts that cannot be objectively ascertained as discriminatory—and study its implications in a model of competitive promotions. When choosing among similarly qualified candidates, a principal with a subtle bias towards a particular group may plausibly deny being biased. We show that subtle (as opposed to overt) discrimination has unique implications. Discriminated candidates perform better in low-stakes careers, while favored candidates perform better in high-stakes careers. In equilibrium, firms are polarized: high-productivity firms become “progressive” and have diverse management teams, while
low-productivity firms choose to be “conservative” and homogeneous at the top.

Keywords: Bias, gender gap, human capital, firm-specific skill, promotion, performance evaluation, glass ceiling, leaking pipe, gender bias, wage gap, wage differential

JEL Classification: M51,J71, J31