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Testing for Employee Discrimination Using Matched Employer-Employee Data: Theory and Evidence

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Author Info
Frijters, Paul (RSSS, Australian National University)
Shields, Michael A. () (University of Melbourne and IZA Bonn)
Theodoropoulos, Nikolaos (University of Leicester)
Wheatley Price, Stephen (University of Leicester and IZA Bonn)

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Abstract

In this paper, we directly test Becker’s theory of employee discrimination using matched worker-workplace data from Britain. Based on a structural model with individual and firm heterogeneity, we develop and test two predictions. Firstly, if white employees have a taste for discrimination they should report lower levels of job satisfaction the larger the proportion of ethnic minorities at their workplace. Secondly, white employees’ wages should also increase with the concentration of ethnic minority co-workers. Both hypotheses are strongly supported for white males in our data, after controlling for human capital and job amenity variables, though not for females. The white male wage premium for working amongst only ethnic minority co-workers, as compared to working only with whites, is about 12%. Neither of these effects operate via realised racial prejudice at the workplace or employees’ feelings concerning job security.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 807.

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Length: 45 pages
Date of creation: Jun 2003
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Handle: RePEc:iza:izadps:dp807

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Related research
Keywords: employee discrimination; compensating differentials; structural estimation; wages; job satisfaction;

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Find related papers by JEL classification:
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
J7 - Labor and Demographic Economics - - Labor Discrimination

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Frijters, Paul & Shields, Michael A. & Wheatley Price, Stephen, 2004. "To Teach or Not to Teach? Panel Data Evidence on the Quitting Decision," IZA Discussion Papers 1164, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Bruno Frey & Alois Stutzer, 2005. "Happiness Research: State and Prospects," Review of Social Economy, Taylor and Francis Journals, vol. 63(2), pages 207-228, June. [Downloadable!] (restricted)
    Other versions:
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