Hiring a Gay Man, Taking a Risk?: A Lab Experiment on Employment Discrimination and Risk Aversion

We investigate risk aversion as a driver of labor market discrimination against homosexual men. We show that more hiring discrimination by more risk-averse employers is consistent with taste-based and statistical discrimination. To test this hypothesis we conduct a scenario experiment in which experimental employers take a fictitious hiring decision concerning a heterosexual or homosexual male job candidate. In addition, participants are surveyed on their risk aversion and other characteristics that might correlate with this risk aversion. Analysis of the (post-)experimental data confirms our hypothesis. The likelihood of a beneficial hiring decision for homosexual male candidates decreases by 31.7% when employers are a standard deviation more risk-averse.