58 Pages Posted: 23 Nov 2021 Last revised: 21 Nov 2022
Date Written: November 18, 2022
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: Suggested Citation