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 promotions. 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. Subtle discrimination also has unique empirical predictions in contexts such as equity analysis, lending, fund flows, banking careers, and entrepreneurial finance.

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