Systemic Discrimination in Firing

Abstract
Do firms discriminate against women and ethnic minorities in firing decisions? Why? We investigate these questions using administrative data from the Netherlands and discontinuous increases in minimum wages at the birthdays of youth workers. Age-wage increases are orthogonal, therefore, to other worker characteristics that may be relevant for firing decisions, including their ethnicity, gender, and productivity. We leverage the orthogonality of these wage increases to estimate the propensity of firms to fire workers of different ethnicities and genders. We use Empirical Bayes methods to identify the distributions of these firing gaps across large firms. We consider various mechanisms that can explain our results, including heterogeneous hiring standards and discriminatory preferences of managers. Joint paper with Jan Kabátek, Sacha Kapoor, Dinand Webbink.