The Economics of Co-ethnic Employment; Incentives, Welfare Effects and Policy Options

Co-ethnic employment refers to the stylised fact of many labour markets that there is an over-representation of workers of the same ethnic group within firms. This paper presents empirical proof of the phenomenon and analyses the incentives for employees to work in co-ethnic firms. It argues that strong social networks and related high intra-group trust constitute the major reasons for co-ethnic employment by lowering information and co-ordination costs. In the short run, co-ethnic employment leads to more jobs for employees, easy access to labour for ethnic minority firms, strengthening of th... Mehr ...