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Firms and ethnic wage differences

Author

Listed:
  • Maré David

    (Motu Economic and Public Policy Research)

  • Richard Fabling

    (Motu Economic and Public Policy Research)

Abstract

We examine the contribution to ethnic earnings gaps of differences in the firms where different ethnic groups work. We use linked employer-employee data to estimate worker and firm pay premiums (fixed effects), adapting existing methods to deal with multiple-response ethnicities and weighting. The sorting of workers across firms contributes 10-26 percent of within-ethnicity gender gaps but affects average earnings for men or women within ethnic groups by less than 1 percent, in the face of average ethnic earnings gaps of up to 14 percent. We conclude that within-firm earnings differences are the dominant source of ethnic earnings gaps.

Suggested Citation

  • Maré David & Richard Fabling, 2025. "Firms and ethnic wage differences," Working Papers 25_07, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:25_07
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    File URL: https://motu-www.motu.org.nz/wpapers/25_07.pdf
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    Keywords

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    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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