TY - JOUR

T1 - Attentional role of quota implementation

AU - Matveenko, Andrei

AU - Mikhalishchev, Sergei

PY - 2021/9/23

Y1 - 2021/9/23

N2 - In this paper, we introduce a new role of quotas, e.g. labor market quotas: the attentional role. We study the effect of quota implementation on the attention allocation strategy of a rationally inattentive (RI) manager. We find that quotas induce attention: a RI manager who is forced to fulfill a quota, unlike an unrestricted RI manager, never rejects minority candidates without acquiring information about them. We also demonstrate that in our model quotas are behaviorally equivalent to subsidies. In addition, we analyze different goals that the social planner can achieve by implementing quotas. First, quotas can eliminate sta-tistical discrimination, i.e. make the chances of being hired independent from the group identity. Second, when the hiring manager has inaccurate beliefs about the distribution of candidates’ productivities, the so-cial planner can make the manager behave as if she has correct beliefs. Finally, we show how our results can be used to set a quota level that increases the expected value of the chosen candidates.

AB - In this paper, we introduce a new role of quotas, e.g. labor market quotas: the attentional role. We study the effect of quota implementation on the attention allocation strategy of a rationally inattentive (RI) manager. We find that quotas induce attention: a RI manager who is forced to fulfill a quota, unlike an unrestricted RI manager, never rejects minority candidates without acquiring information about them. We also demonstrate that in our model quotas are behaviorally equivalent to subsidies. In addition, we analyze different goals that the social planner can achieve by implementing quotas. First, quotas can eliminate sta-tistical discrimination, i.e. make the chances of being hired independent from the group identity. Second, when the hiring manager has inaccurate beliefs about the distribution of candidates’ productivities, the so-cial planner can make the manager behave as if she has correct beliefs. Finally, we show how our results can be used to set a quota level that increases the expected value of the chosen candidates.

KW - Faculty of Social Sciences

KW - Discrete choice

KW - rational inattention

KW - Multinomial logit

KW - quotas

U2 - 10.1016/j.jet.2021.105356

DO - 10.1016/j.jet.2021.105356

M3 - Journal article

VL - 198

JO - Journal of Economic Theory

JF - Journal of Economic Theory

SN - 0022-0531

M1 - 105356

ER -