The Power to Discriminate

Abstract

We investigate the relationship between employer power and labor market discrimination. Using mass layoffs to induce job search, we compare real job seekers of equal quality with matching labor market signals but different migration backgrounds. Our findings reveal widespread wage and employment discrimination. We show that this discrimination stems from employers’ control over labor markets, and that product market power has no effect on the discrimination practices of employers. We then reveal that discrimination arises from incorrect beliefs about immigrants’ productivity. Finally, we show that continuous employer interactions with immigrants help correct these misconceptions, ultimately closing the wage and employment gaps.

Samuel Dodini

Senior Research Economist

My broad research interests include empirical explorations of the economics of labor markets, incorporating insights from behavioral economics, occupational licensing, monopsony power, education, public finance, and urban economics.