2020/06/26 by Chika O. Okafor, Okafor, Chika O. · 1 citation
Economics, Econometrics and Finance · Social Sciences · #FOS: Economics and business #General Economics (econ.GN) #Labor Movements and Unions #Labor market dynamics and wage inequality #Migration, Ethnicity, and Economy
paper · pdf · doi:10.48550/arxiv.2006.15988
openalex publication_date 2020/06/26 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
I study labor markets in which firms hire via referrals. I develop an employment model showing that--despite initial equality in ability, employment, wages, and network structure--minorities receive fewer jobs through referral and lower expected wages, simply because their social group is smaller. This disparity, termed "social network discrimination," falls outside the dominant economics discrimination models--taste-based and statistical. Social network discrimination can be mitigated by minorities having more social ties or a "stronger-knit" network. I calibrate the model using a nationally-representative U.S. sample and estimate the lower-bound welfare gap caused by social network discrimination at over four percent, disadvantaging black workers.