Seeking Similarity: How Immigrants and Natives Manage in the Labor Market

We investigate how the interplay between manager and worker origin affects hiring patterns, job separations, and wages. Numerous specifications utilizing a longitudinal matched employer-employee database including 70,000 establishments consistently show that managers are substantially more likely to hire workers of their own origin. Workers who share an origin with their managers earn higher wages and have lower separation rates than dissimilar workers, but this pattern is driven by differences in unobserved worker characteristics. Our findings indicate that the sorting patterns are more likely to be explained by profit-maximizing concerns than by preference-based discrimination.