The Dynamic Effects of Co-Racial Hiring

Revise and resubmit, Journal of Labor Economics

• (Formerly titled “The Dynamics of Referral Hiring and Racial Inequality: Evidence from Brazil”)
  • NBER Working Paper 29246
  • Upjohn Institute Working Paper 21-352

Abstract

In Brazil, firms’ later hires are more likely to be nonwhite than early hires for the same job. We argue that this pattern reflects racial disparities in entrepreneurship and co-racial hiring: firms are more likely to hire from groups already well-represented at the firm, though with some decay. At entry, firms with white founders are about 30% less likely to hire nonwhite employees than comparable firms with nonwhite founders. After 400 hires, these firms nearly converge in their composition of subsequent hires. Yet few firms reach this scale. Within-firm racial differences in dismissal rates follow an analogous pattern. We provide suggestive evidence that referral hiring can at least in part account for our findings.