The Boss is Watching: How Monitoring Decisions Hurt Black Workers
African Americans face shorter employment durations than apparently similar whites. We hypothesize that employers discriminate in either acquiring or acting on ability-relevant information. We construct a model in which firms may "monitor" workers. Monitoring black but not white workers is self-sustaining: new black hires are more likely to have been screened by a previous employer, causing firms to discriminate in monitoring. We confirm the model's prediction that the unemployment hazard is initially higher for blacks but converges to that for whites. Two additional predictions, lower lifetime incomes and longer unemployment durations for blacks, are known to be strongly empirically supported.
This research was funded in part by NSF grants SES-1260917 and SES-1851636. It draws on similar intuition to Cavounidis and Lang (2015) but greatly simplifies the theory and adds an empirical section testing the main new prediction. We are grateful to Cheonghum Park for excellent research assistance and to Gautam Bose, Sambuddha Ghosh, Larry Katz, Ed Lazear, Calvin Luscombe, Ioana Marinescu, Derek Neal, Marina Soley-Bori, Bill Spriggs and participants in seminars and conferences at Boston University, Cornell, IZA/OECD, NBER, Tufts, the University of California, Riverside and West Point Military Academy for helpful comments and suggestions on this and the earlier paper. The usual caveat applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.