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

62 Pages Posted: 22 Oct 2018 Last revised: 17 Apr 2022

See all articles by François Gerard

François Gerard

Center for Operations Research and Econometrics (CORE)

Lorenzo Lagos

Columbia University

Edson Severnini

Carnegie Mellon University

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Date Written: October 2018

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, François and Lagos, Lorenzo and Severnini, Edson and Card, David E., Assortative Matching or Exclusionary Hiring? The Impact of Firm Policies on Racial Wage Differences in Brazil (October 2018). NBER Working Paper No. w25176, Available at SSRN: https://ssrn.com/abstract=3270756

François Gerard (Contact Author)

Center for Operations Research and Econometrics (CORE) ( email )

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B-1348 Louvain-la-Neuve, b-1348
Belgium

Lorenzo Lagos

Columbia University

Edson Severnini

Carnegie Mellon University

Pittsburgh, PA 15213-3890
United States

David E. Card

University of California, Berkeley - Department of Economics ( email )

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Berkeley, CA 94720-3880
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Institute for the Study of Labor (IZA)

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National Bureau of Economic Research (NBER)

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