Abstract

We formalize and test an implication of Becker’s (1957) model of employer taste-based discrimination: racial preferences may remain visible in workplace segregation even when no racial wage gap is observed. We leverage more than 3.4 million observations from 15,000 naturally occurring virtual labor markets with real incentives and rich productivity information, where worker-side sorting is absent, institutional heterogeneity across firms is limited, and alternative discrimination channels are restricted. We find no evidence of price discrimination: Black and Non-Black workers with similar productivity are hired at statistically indistinguishable prices. Yet workplace segregation systematically exceeds race-neutral permutation benchmarks, consistent with heterogeneous employer tastes. This segregation pattern persists across years and market sizes despite price equality, while firms hiring relatively fewer Black workers do not face a profit or performance penalty. We discuss how such preferences may sustain discrimination even under transparent information and strong competitive incentives.

Country of study

Switzerland

Research Topic(s)