Are firms that discriminate more likely to go out of business
Open accessAbstract
Economic theory has long maintained that employers pay a price for engaging in racial discrimination. According to Gary Becker’s seminal work on this topic and the rich literature that followed, racial preferences unrelated to productivity are costly and, in a competitive market, should drive discriminatory employers out of business. Though a dominant theoretical proposition in the field of economics, this argument has never before been subjected to direct empirical scrutiny. This research pairs an experimental audit study of racial discrimination in employment with an employer database capturing information on establishment survival, examining the relationship between observed discrimination and firm longevity. Results suggest that employers who engage in hiring discrimination are less likely to remain in business six years later.
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This underutilisation of talent could result in needless economic costs for firms and society.
“This underutilisation of talent could result in needless economic costs for firms and society (Baert, 2021;OECD, 2020a;Pager, 2016).”
From The state of hiring discrimination: A meta-analysis of (almost) all recent correspondence experiments (2023) · cites this paper as Pager, 2016
The Abstract says racial preferences unrelated to productivity can be costly to employers, and the section ‘What Does the Relationship between Discrimination and Business Failure Represent?’ describes discrimination as prioritizing worker characteristics irrelevant to productivity. These passages support possible costs to firms, but the paper does not establish economic costs to society from underutilised talent. The paper also cautions that its results cannot establish discrimination as the direct cause of firm failure. Page numbers were not provided in our copy. (LLM, conf=0.84)
Experimental — accuracy not yet measuredPager (2016) found employers who discriminated in her field experiment were more likely to subsequently go out of business than those that did not.
“Second, Pager (2016) finds that employers who discriminated in her field experiment were more likely to subsequently go out of business than those that did not, consistent with economic models of taste discrimination.”
From Comparative Perspectives on Racial Discrimination in Hiring: The Rise of Field Experiments (2021) · cites this paper as Pager (2016)
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Cites
Discrimination in a Low-Wage Labor Market: A Field Experiment
Pager, D., Bonikowski, B., & Western, B. (2009) · American Sociological Review · doi:10.1177/000312240907400505 · Cited by 1,022 · see citing works
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Research works printed but not linked: 26
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Cited by
Sorted by citations
Comparative Perspectives on Racial Discrimination in Hiring: The Rise of Field Experiments
Quillian, L., & Midtbøen, A. H. (2021) · Annual Review of Sociology · doi:10.1146/annurev-soc-090420-035144 · Cited by 180 · see citing works
Lippens, L., Vermeiren, S., & Baert, S. (2023) · European Economic Review · doi:10.1016/j.euroecorev.2022.104315
- Authors
- Pager, D.
- Affiliations
- Harvard University (US)
- Corresponding author
- Pager, Devah
- Venue
- Sociological Science
- Publisher
- Society for Sociological Science
- Published
- 2016
- Volume
- 3
- Pages
- 849-859
- ISSN
- 2330-6696 (ISSN-L)
- OpenAlex
- W2486370133
- Cited by
- 63
- References
- 1
- Citations by year
- 2026: 5 · 2025: 6 · 2024: 3 · 2023: 6 · 2022: 8 · 2021: 14 · 2020: 5 · 2019: 7 · 2018: 5 · 2017: 4
- FWCI
- 13.82
- Type
- journal article
- Language
- en
- Open access
- gold
- doi.org
- Licence
- cc-by
- Locations
- Sociological Science (publishedVersion, cc-by)
- DOAJ (DOAJ: Directory of Open Access Journals) (submittedVersion, cc-by-sa)
- Funders
- National Science Foundation (0547810)
- Harvard University
- National Institutes of Health
- Eunice Kennedy Shriver National Institute of Child Health and Human Development (K01HD053694)
- Topics
- Social Sciences › Sociology and Political Science › Names, Identity, and Discrimination Research
- Social Sciences › Safety Research › Experimental Behavioral Economics Studies
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Labor market dynamics and wage inequality
- Keywords
- racial discrimination in employment, business survival, firm longevity, hiring discrimination, employer discrimination, racial preferences, labor market discrimination
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