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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.

Suggested Citation

  • Paul Frijters & Michael A. Shields & Nikolaos Theodoropoulos & Stephen Wheatley Price, 2004. "Testing For Employee Discrimination Using Matched Employer-Employee Data: Theory And Evidence," Department of Economics - Working Papers Series 915, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:915
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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," Department of Economics - Working Papers Series 916, The University of Melbourne.
    2. Bruno Frey & Alois Stutzer, 2005. "Happiness Research: State and Prospects," Review of Social Economy, Taylor & Francis Journals, vol. 63(2), pages 207-228.
    3. Timothy J. Hatton, 2011. "The Social and Labor Market Outcomes of Ethnic Minorities in the UK," Chapters,in: Ethnic Diversity in European Labor Markets, chapter 13 Edward Elgar Publishing.
    4. Richard Hobbs & Wanjiru Njoya, 2005. "Regulating the European Labour Market: Prospects and Limitations of a Reflexive Governance Approach," British Journal of Industrial Relations, London School of Economics, vol. 43(2), pages 297-319, June.
    5. Paul H. Jensen, 2010. "Exploring the Uses of Matched Employer-Employee Datasets," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(2), pages 209-216.
    6. Kodama, Naomi & Odaki, Kazuhiko, 2013. "Employee Discrimination against Female Executives," CIS Discussion paper series 611, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    7. Martin Kahanec & Klaus F. Zimmermann (ed.), 2011. "Ethnic Diversity in European Labor Markets," Books, Edward Elgar Publishing, number 13572.

    More about this item

    Keywords

    Employee Discrimination; Compensating Differentials; StructuralEstimation; Wages; Job Satisfaction;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J7 - Labor and Demographic Economics - - Labor Discrimination

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