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Testing For Employee Discrimination Using Matched Employer-Employee Data: Theory And Evidence

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  • Paul Frijters
  • Michael A. Shields
  • Nikolaos Theodoropoulos
  • Stephen Wheatley Price

Abstract

We use recent matched employer-employee data to directly investigate if white workers have a taste for racial discrimination in Britain. Based on a new structural model with individual and firm heterogeneity, we develop and test two predictions. Firstly, white employees with a taste for discrimination should report lower levels of job satisfaction the larger the proportion of ethnic minorities at their workplace. Secondly, white employees would have to be compensated by higher wages if required to work alongside ethnic minority co-workers. Both hypotheses are clearly supported for white males in our data, after comprehensively controlling for individual, job, and workplace characteristics. However, the evidence is weaker 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%. Importantly, it appears that neither of these effects operates via realised racial prejudice at the workplace or white employees’ feelings concerning their job security.

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File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-04/915.pdf
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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 915.

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Length: 47 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:mlb:wpaper:915

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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
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Web page: http://www.economics.unimelb.edu.au
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Keywords: Employee Discrimination; Compensating Differentials; StructuralEstimation; Wages; Job Satisfaction;

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References

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Cited by:
  1. Paul Frijters & Michael A. Shields & Stephen Wheatley Price, 2004. "To Teach Or Not To Teach? Panel Data Evidence On The Quitting Decision," Paul Frijters Discussion Papers 2004-5, School of Economics and Finance, Queensland University of Technology.
  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.

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