Subtle Discrimination

58 Pages Posted: 23 Nov 2021 Last revised: 21 Nov 2022

See all articles by Daniel Ferreira

Daniel Ferreira

London School of Economics - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Elena Pikulina

Finance Division, Sauder School of Business, University of British Columbia (UBC)

Date Written: November 18, 2022

Abstract

We propose a theory of subtle discrimination, defined as discriminatory behavior without direct payoff consequences for the decision-maker. We present a model in which candidates compete for promotion to a better job. When choosing among equally-qualified candidates, the principal subtly discriminates by breaking ties in favor of candidates from a particular group. Subtle discrimination distorts candidates’ human capital investment decisions. The model predicts that discriminated agents perform better in low-stakes careers, while favored agents perform better in high stakes careers. In equilibrium, firms are polarized: high-productivity firms strive to be “progressive” and have diverse top management teams, while low-productivity firms prefer to be “conservative” and have little diversity at the top.

Keywords: 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

Suggested Citation

Ferreira, Daniel and Pikulina, Elena, Subtle Discrimination (November 18, 2022). Available at SSRN: https://ssrn.com/abstract=3966838 or http://dx.doi.org/10.2139/ssrn.3966838

Daniel Ferreira

London School of Economics - Department of Finance ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
(+44) 20 7955 7544 (Phone)

HOME PAGE: http://personal.lse.ac.uk/FERREIRD/

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Elena Pikulina (Contact Author)

Finance Division, Sauder School of Business, University of British Columbia (UBC) ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
6048223314 (Phone)

HOME PAGE: http://epikulina.com

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