Economics Seminar - Isaac Sorkin

This paper develops a framework to quantify racial disparities in earnings and employment that are not plausibly due to differences in productivity. Employers learn about worker productivity over time, and so we can use implications of this behavior to match high-tenure Black and white workers on unobservables in their current jobs. Gaps in earnings and separations between these high-tenure matched pairs in their next jobs are then not plausibly due to differences in productivity. Using U.S. matched employer-employee data, earnings differences among these matched workers are about five log points, about a third of the racial earnings gap among high-tenure workers. Similarly, in their next job, matched Black workers are about a third of a percentage point more likely to separate each quarter. The welfare costs of these separation differences are over half of a percent of lifetime consumption.