Discrimination in Hiring: Evidence from Retail Sales

Alan M. Benson, University of Minnesota, Simon Board, UCLA, and Moritz Meyer-ter-vehn, UCLA

We propose a simple model of racial bias in hiring that encompasses three major theories: taste-based discrimination, screening discrimination, and complementary production. We derive a test that can distinguish these theories based on the mean and variance of workers’ productivity under managers of different pairs of races. We apply this test to study discrimination at a major U.S. retailer using data from 48,755 newly-hired commission-based salespeople. White, black and Hispanic managers within the same store are significantly more likely to hire workers of their own race, consistent with all three theories. For black-Hispanic pairs, productivity variance is lower for same-race pairs than cross-race pairs, implying that screening discrimination dominates. For white-Hispanic pairs, mean productivity is higher for same-race pairs, indicating a combination of screening discrimination and complementary production. For white-black pairs, biased hiring implies the presence of discrimination, but productivity results suggest the effects of the three forms of discrimination offset one another.