Wednesday, 15 September 2021

Uncovering labour market discrimination against foreign-born and native-born minority workers

There is an interesting strand of research in economics (especially labour economics) that seeks to uncover evidence of discrimination using what are referred to as correspondence tests. Essentially, the researchers send out pairs of job applications to a bunch of firms, where each pair of applications differs only in some characteristic that the researchers want to test for discrimination against. So, for example, in the original research using this method (ungated version here) by Marianne Bertrand and Sendhil Mullainathan, the CVs they sent out had either an African American name or a non-African-American name. They then compared the number of each type that were invited to interviews.

The literature that applies this approach is large and growing. However, this short 2017 article by Nick Drydakis (Anglia Ruskin University), published in the journal Economics Letters (ungated earlier version here) caught my eye. In the paper, Drydakis compares invitations to interviews at 344 Greek firms between CVs that were designed to be interpreted as being for Greek-born applicants with Greek names (natives), foreign-born applicants with foreign names (non-natives, where the names were obviously Albanian, Ukrainian, or Georgian), and Greek-born applicants with foreign names (natives with an ethnic minority background). He finds that:

...natives with an ethnic-minority background have a 17.5 percentage points lower chance of receiving an invitation for interview than natives. Also, it is observed that non-natives have a 20.1 percentage points lower chance of receiving an invitation for interview than natives. Both estimates are statistically significant at the 1% level. However, the two estimates are not statistically significantly different...

In other words, Greek-born applicants with non-native names and foreign-born applicants are essentially discriminated against to the same extent. That suggests that discrimination in this context is to some extent taste-based discrimination (where employers have preferences not to employ the minority group), rather than statistical discrimination (where belonging to a particular group is statistically associated with lower productivity, which might arise for instance when that group has lower education). We can infer that statistical discrimination is less likely, because the CVs of the Greek-born applicants with non-native names showed the same educational and labour market backgrounds as the CVs of the native applicants.

Also interesting is that the discrimination extends to wages as well:

...natives with an ethnic-minority background are invited for interviews for vacancies that offer 5.5 percentage points lower wages compared to natives. Moreover, the estimates suggest that non-natives are invited for interviews for vacancies that offer 6.4 percentage points lower wages compared to natives. Both estimates are statistically significant at the 1% level. However, the two estimates are not statistically significantly different...

So again, there is no difference between the Greek-born applicants with non-native names and foreign-born applicants. This should be especially disappointing for children of immigrants. I wonder if these results hold in other countries besides Greece? I also wonder to what extent these effects might be moderated by contact with minority groups, as per the contact hypothesis I discussed yesterday. Those suggest some potential avenues for future research.

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