Attentional role of quota implementation

Andrei Matveenko and Sergei Mikhalishchev

Journal of Economic Theory, 2021, vol. 198, issue C

Abstract: 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 statistical 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 social 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.

Keywords: Discrete choice; Rational inattention; Multinomial logit; Quotas (search for similar items in EconPapers)
JEL-codes: D63 D81 D83 H23 J08 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Attentional Role of Quota Implementation (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:198:y:2021:i:c:s0022053121001733

DOI: 10.1016/j.jet.2021.105356

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