We investigate the effects of group identity on hiring decisions with adverse selection problems. We run a laboratory experiment in which employers cannot observe a worker’s ability or verify the veracity of the ability the worker claims to have. We evaluate whether sharing an identity results in employers discriminating in favor of ingroup workers and whether it helps workers and employers overcome the adverse selection problem. We induce identities using the minimal group paradigm and study two settings: one in which workers cannot change their identity and one in which they can. Although sharing a common identity does not make the worker’s claims more honest, employers strongly discriminate in favor of ingroup workers when identities are fixed. Discrimination cannot be explained by employers’ beliefs and, hence, seems to be taste-based. When possible, few workers change their identity. However, the mere possibility of changing identities erodes the employers’ trust toward ingroup workers and eliminates discrimination.This paper was accepted by Yan Chen, behavioral economics and decision analysis.
Bibliographical noteFunding Information:
History: Accepted by Yan Chen, behavioral economics and decision analysis. Funding: This work was supported by Tamkeen [NYU Abu Dhabi Research Institute Award CG005] and Agence Nationale de la Recherche [Grants ANR-11-IDEX-007 and ANR-11-LABX-0042]. Supplemental Material: The data files are available at https://doi.org/10.3886/E171921V1.
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- group identity
- hiring decisions
- laboratory experiment
- employers discriminating