Risk and Discrimination

16 Pages Posted: 2 Nov 2011

See all articles by Josh Ederington

Josh Ederington

University of Kentucky - Department of Economics

Jenny Minier

University of Kentucky - Department of Economics

C. Jill Stowe

University of Kentucky

Date Written: October 1, 2011

Abstract

In the traditional Becker model of employer discrimination, discriminatory behavior arises from a utility-maximizing owner who balances firm profits against the disutility of hiring workers from the disadvantaged demographic group. However, in the modern firm, many human resource decisions are made by agents of the owner (i.e., managers) whose actions do not necessarily reflect the preferences of even profit-maximizing owners. In this paper, we present a principal-agent model of discrimination with a profit-maximizing principal (owner) and a gender-discriminating agent (management). We show that managerial discrimination is increasing with the degree of risk in the revenue-generating process. We then test this relationship using a Colombian plant-level dataset and show that, consistent with our model, the female share of the labor force is decreasing in various measures of both industry-level and plant-level volatility.

Suggested Citation

Ederington, Josh and Minier, Jenny and Stowe, Jill, Risk and Discrimination (October 1, 2011). Available at SSRN: https://ssrn.com/abstract=1952799 or http://dx.doi.org/10.2139/ssrn.1952799

Josh Ederington

University of Kentucky - Department of Economics ( email )

335 Business and Economics Building
Lexington, KY 40506
United States

Jenny Minier

University of Kentucky - Department of Economics ( email )

335 Business and Economics Building
Lexington, KY 40506
United States

Jill Stowe (Contact Author)

University of Kentucky ( email )

Lexington, KY 40546
United States

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