On the labor market effects of salience of ethnic/racial disputes

Abstract

An increase in the salience of ethnic/racial (E/R) disputes often signifies a shift in the E/R status quo of a society. We present a labor market model where matching frictions are higher for the E/R minority due to labor market discrimination and the unemployment insurance benefits are determined via competitive elections. We hypothesize that a reduction in labor market discrimination, possibly because of its salience, shifts the unemployment from the minority to the majority, leading to a drop in the unemployment rate among the black minority, and consequently the unemployment insurance they receive. Nevertheless, the total unemployment insurance benefit may increase because the median voter, who is a member of the majority, prefers a higher level of unemployment insurance. To empirically test our hypothesis, we constructed a novel, news‐based, and time‐varying measure of E/R discrimination salience for the US and show that unemployment insurance benefits to the black minority decreases in response to an increase in our measure.

Ethnic entrepreneurship, assimilation, and integration policy

“…Our paper also complements previous literature which studies the labor market outcome of the integration policy. For example, Aköz et al (2022) shows that reduction in discrimination shifts the unemployment from the minority to the majority.…”