Racial Peer Effects at Work

Investment Rating - The report does not provide a specific investment rating for the industry. Core Insights - The study investigates the impact of working with same-race coworkers on employee retention, revealing that a decrease in the non-white share of coworkers significantly reduces the retention of non-white workers, while white workers' retention remains unaffected [4][12][46] - The findings suggest that peer dynamics contribute to racial segregation in workplaces, with non-white workers more likely to leave for jobs with a higher proportion of same-race peers [4][13][46] - The analysis utilizes administrative employer-employee data from Brazil, focusing on the effects of unexpected worker deaths as exogenous shocks to peer group composition [4][12][27] Summary by Sections Introduction - The paper examines how the presence of same-race peers influences worker retention, positing that individuals prefer to work with those of similar racial backgrounds [8][9] Background and Data - Brazil exhibits significant racial segregation in labor markets, with about 80% of white workers' colleagues being white, compared to 50% for non-white workers [9][21] - The study uses data from the Relação Anual de Informações Sociais (RAIS), which includes comprehensive records of formal employment in Brazil [26][27] Empirical Strategy - The research exploits unexpected deaths of workers to analyze changes in peer group racial composition and its effects on retention [27][37] - The study focuses on small peer groups to ensure that the death of one worker significantly impacts the racial composition [33][34] Results - The death of a non-white coworker leads to a 1.1 percentage point decrease in the retention of non-white incumbents, equating to a 1.8% drop relative to the control mean [12][46] - The retention rates of white incumbents show no significant changes following the death of either a white or non-white coworker [12][46] - The study finds that non-white workers tend to leave for new jobs with a higher share of same-race peers, indicating a preference for racial homophily in workplace settings [13][46]