Subtle discrimination

Elena S. Pikulina and Daniel Ferreira

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We introduce the concept of subtle discrimination—biased acts that cannot be objectively ascertained as discriminatory. When candidates compete for promotions by investing in skills, firms' subtle biases induce discriminated candidates to overinvest when promotions are low-stakes (to distinguish themselves from favored candidates) but underinvest in high-stakes settings (anticipating low promotion probabilities). This asymmetry implies that subtle discrimination raises profits in low-productivity firms but lowers them in high-productivity firms. Although subtle biases are small, they generate large gaps in skills and promotion outcomes. We derive further predictions in contexts such as equity analysis, lending, fund flows, banking careers, and entrepreneurial finance.

Keywords: promotions; firm performance; bias; human capital (search for similar items in EconPapers)
JEL-codes: J31 J71 M51 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2025-10-06
New Economics Papers: this item is included in nep-bec and nep-hrm
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Published in Journal of Finance, 6, October, 2025. ISSN: 0022-1082

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