Firm hierarchy and employment segregation

Abstract

We study how the number of hierarchical levels in firms affects employment segregation, first, in a simplified flow model of the labor market, and then by endogenizing the transition probabilities in a simulation model. A new hierarchical level can reduce segregation and serve as a stepping stone for disadvantaged workers in the "bottleneck" part of the career ladder. Yet, it can become a stumbling block, increasing segregation, if introduced in other parts of the ladder.