Access to Financing and Racial Pay Gap Inside Firms
July 2023
Working Paper Number:
CES-23-36
Abstract
How does access to financing influence racial pay inequality inside firms? We answer this question using the employer-employee matched data administered by the U.S. Census Bureau and detailed resume data recording workers' career trajectories. Exploiting exogenous shocks to firms' debt capacity, we find that better access to debt financing significantly narrows the earnings gap between minority and white workers. Minority workers experience a persistent increase in earnings and also a rise in the pay rank relative to white workers in the same firm. The effect is more pronounced among mid- and high-skill minority workers, in areas where white workers are in shorter supply, and for firms with ex-ante less diverse boards and greater pre-existing racial inequality. With better access to financing, minority workers are also more likely to be promoted or be reassigned to technology-oriented occupations compared to white workers. Our evidence is consistent with access to financing making firms better utilize minority workers' human capital.
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:
employ,
minority,
finance,
financing,
ethnicity,
ethnic,
loan,
borrowing,
tenure,
discrimination,
workforce,
debt,
wealth,
racial,
race,
debtor,
worker demographics,
banking,
creditor
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identified to contain references to specific institutions, datasets, and other organizations.
:
Ordinary Least Squares,
Securities and Exchange Commission,
Current Population Survey,
Longitudinal Business Database,
Center for Research in Security Prices,
Standard Occupational Classification,
North American Industry Classification System,
Alfred P Sloan Foundation,
Longitudinal Employer Household Dynamics,
LEHD Program,
Employment History File,
Individual Characteristics File,
Herfindahl Hirschman Index,
Business Register Bridge,
Census Bureau Disclosure Review Board,
Herfindahl-Hirschman,
Disclosure Review Board,
International Trade Research Report,
Federal Statistical Research Data Center
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