Does Reducing Communication Barriers Promote Diversity?
53 Pages Posted: 25 Jul 2022 Last revised: 5 Jun 2023
Date Written: June 5, 2023
We study optimal diversity (in expertise) in hiring decisions. The key trade-off is that, while hiring a more diverse team enlarges the team's pool of knowledge, it may also discourage communication between the hired experts. Equilibrium diversity balances this trade-off. We find that a gradual reduction in communication costs can lower diversity, but a big reduction in communication costs will eventually foster diversity.
Keywords: diversity, communication
JEL Classification: D82, D83, M14
Suggested Citation: Suggested Citation