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Assortative Matching or Exclusionary Hiring? The Impact of Firm Policies on Racial Wage Differences in Brazil

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  • Gerard, Francois

    (Queen Mary, University of London)

  • Lagos, Lorenzo

    (Brown University)

  • Severnini, Edson R.

    (Carnegie Mellon University)

  • Card, David

    (University of California, Berkeley)

Abstract

A growing body of research shows that firms' employment and wage-setting policies contribute to wage inequality and pay disparities between groups. We measure the effects of these policies on racial pay differences in Brazil. We find that nonwhites are less likely to work at establishments that pay more to all race groups, a pattern that explains about 20% of the white-nonwhite wage gap for both genders. The pay premiums offered by different employers are also compressed for nonwhites relative to whites, contributing another 5% of the overall gap. We then ask how much of the under-representation of nonwhites at higher-paying workplaces is due to the selective skill mix at these establishments. Using a counterfactual based on the observed skill distribution at each establishment and the nonwhite shares in different skill groups in the local labor market, we conclude that assortative matching accounts for about two-thirds of the under-representation gap for both men and women. The remainder reflects an unexplained preference for white workers at higher-paying establishments. The wage losses associated with unexplained sorting and differential wage setting are largest for nonwhites with the highest levels of general skills, suggesting that the allocative costs of race-based preferences may be relatively large in Brazil.

Suggested Citation

  • Gerard, Francois & Lagos, Lorenzo & Severnini, Edson R. & Card, David, 2018. "Assortative Matching or Exclusionary Hiring? The Impact of Firm Policies on Racial Wage Differences in Brazil," IZA Discussion Papers 11923, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11923
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    2. Christopher Neilson & Federico Huneeus & Conrad Miller & Seth Zimmerman, 2021. "Firm Sorting, College Major, and the Gender Earnings Gap," Working Papers 649, Princeton University, Department of Economics, Industrial Relations Section..
    3. David Arnold, 2022. "The Impact of Privatization of State-Owned Enterprises on Workers," American Economic Journal: Applied Economics, American Economic Association, vol. 14(4), pages 343-380, October.
    4. David Card & Fabrizio Colella & Rafael Lalive, 2021. "Gender Preferences in Job Vacancies and Workplace Gender Diversity," NBER Working Papers 29350, National Bureau of Economic Research, Inc.
    5. Andrej Cupák & Pavel Ciaian & d'Artis Kancs, 2021. "Comparing the immigrant-native pay gap: A novel evidence from home and host countries," EERI Research Paper Series EERI RP 2021/05, Economics and Econometrics Research Institute (EERI), Brussels.
    6. Corseuil, Carlos Henrique & Foguel, Miguel N. & Gonzaga, Gustavo, 2019. "Apprenticeship as a stepping stone to better jobs: Evidence from Brazilian matched employer-employee data," Labour Economics, Elsevier, vol. 57(C), pages 177-194.
    7. Morchio, Iacopo & Moser, Christian, 2018. "The Gender Pay Gap: Micro Sources and Macro Consequences," MPRA Paper 99276, University Library of Munich, Germany, revised 24 Mar 2020.
    8. Benjamin Schoefer & Oren Ziv, 2021. "Productivity, Place, and Plants," CESifo Working Paper Series 8843, CESifo.
    9. Anna Sokolova & Todd Sorensen, 2021. "Monopsony in Labor Markets: A Meta-Analysis," ILR Review, Cornell University, ILR School, vol. 74(1), pages 27-55, January.
    10. Dostie, Benoit & Li, Jiang & Card, David & Parent, Daniel, 2020. "Employer Policies and the Immigrant-Native Earnings Gap," IZA Discussion Papers 13245, Institute of Labor Economics (IZA).
    11. Perova,Elizaveta & Reynolds,Sarah Anne & Schmutte,Ian, 2021. "Does the Gender Wage Gap Influence Intimate Partner Violence in Brazil ? Evidence from Administrative Health Data," Policy Research Working Paper Series 9656, The World Bank.
    12. Felipe Benguria, 2020. "Firms, Jobs, and Gender Disparities in Top Incomes: Evidence from Brazil," Upjohn Working Papers 20-338, W.E. Upjohn Institute for Employment Research.
    13. Morchio, Iacopo & Moser, Christian, 2018. "The Gender Pay Gap: Micro Sources and Macro Consequences," MPRA Paper 99276, University Library of Munich, Germany, revised 24 Mar 2020.
    14. Ihsaan Bassier, 2019. "The wage-setting power of firms: Rent-sharing and monopsony in South Africa," WIDER Working Paper Series wp-2019-34, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    racial wage differences; firm policies; discrimination; assortative matching; Brazil;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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