Learning In Reverse Causal Strategic Environments With Ramifications on Two Sided Markets

TL;DR

This paper explores how strategic agents in labor markets can manipulate outcomes, showing that employers optimizing for performance can improve rewards and skills but may also harm utility and equity, with implications for two-sided markets.

Contribution

It introduces a causal strategic classification framework for labor markets, analyzing the impact of performative strategies on employer and labor force outcomes.

Findings

Performative optimal hiring improves employer reward and skill levels.

Such strategies can harm labor force utility and equity.

Employers' strategic behavior influences discrimination and market dynamics.

Abstract

Motivated by equilibrium models of labor markets, we develop a formulation of causal strategic classification in which strategic agents can directly manipulate their outcomes. As an application, we compare employers that anticipate the strategic response of a labor force with employers that do not. We show through a combination of theory and experiment that employers with performatively optimal hiring policies improve employer reward, labor force skill level, and in some cases labor force equity. On the other hand, we demonstrate that performative employers harm labor force utility and fail to prevent discrimination in other cases.