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Discrimination in Promotion

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  • Prummer, Anja
  • Nava, Francesco

Abstract

Does an employer benefit from inducing differential value distributions for a promotion among his workers? Workers compete by exerting effort and higher effort corresponds to higher profit for the employer. Introducing inequalities in valuations makes workers' value more easily recognisable, reducing their information rent, which in turn increases effort. At the same time, inequalities lead to differences in promotion attainment, even if realised values are identical. This corresponds to a decrease in competition. We show that if value is re-distributed, the reduction in information rent outweighs the loss in competition, making discrimination between workers optimal.

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  • Prummer, Anja & Nava, Francesco, 2021. "Discrimination in Promotion," CEPR Discussion Papers 15672, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15672
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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