Working Paper 09/227 - abstract

An Economic Theory of Glass Ceiling (PDF, 587kB)

Paul A.Grout, In-Uck Park and Silvia Sonderegger

This is an updated version of 07/183

In the ‘glass ceiling’ debate there appear to be two strongly held and opposing interpretations of the evidence, one suggesting it is really the result of gender differences and the other that there is discrimination by gender. This paper provides an economic theory of the glass ceiling and one of the main insights of our analysis is that in some real sense these two interpretations are not in conflict with each other. The glass ceiling emerges as an equilibrium phenomenon when firms compete à la Bertrand even though employers know that offering women the same contract as men would be sufficient to erase all differences among promoted workers. The model also provides new insights into anti discrimination policy measures.