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. (c) 2021 CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences.
Published by Elsevier Inc. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).