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Equilibrium Screening and Categorical Inequality

  • Mogens Fosgerau
  • Rajiv Sethi
  • Jörgen Weibull
American Economic Journal: Microeconomics
vol. 15, no. 3, August 2023
(pp. 201-42)
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Abstract

We analyze equilibrium outcomes under costly screening of candidates from distinct categories. Candidates choose how much effort to invest in skill acquisition, and the screener decides how carefully to screen each candidate. Typically, there are multiple equilibria, and ex ante identical individuals in different categories can receive different equilibrium treatment. The imposition of a quota for an initially disadvantaged group can result in increased screening intensity and skill investment by destabilizing the least active equilibrium. The endogeneity of screening enables powerful comparative statics, which we use to unify different strands in the literature on discrimination.

Citation

Fosgerau, Mogens, Rajiv Sethi, and Jörgen Weibull. 2023. "Equilibrium Screening and Categorical Inequality." American Economic Journal: Microeconomics, 15 (3): 201-42. DOI: 10.1257/mic.20210391

Additional Materials

JEL Classification

  • D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
  • D82 Asymmetric and Private Information; Mechanism Design
  • D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials
  • J71 Labor Discrimination
  • M51 Personnel Economics: Firm Employment Decisions; Promotions
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