The Dynamics of Racial Discrimination in a Virtual Labour Market

Abstract
We test Becker's prediction on employer racial prejudice in a dynamic environment where discrimination is not illegal and information on all workers’ productivity is available to all firms. The firms considered are the more than 2 million participants to Fantasy Football (soccer), an on-line game where participants manage a team of real footballers over a nine-month period. We find that the marginal non-white footballer needs to be more productive than a white footballer to be recruited, promoted and to avoid dismissal. These decisions lead to firms becoming “whiter” over time.
These effects are strongest among the most productive footballers but, because elite footballers are close substitutes, the productivity losses of discrimination are limited. Allied to an environment where discrimination is not illegal, and mostly private, this allows virtual employers to satisfy their taste for discrimination. The results are robust to three different measures of race. Joint paper with Alex Bryson (UCL).