Knowledge that Transforms

Do labour markets discriminate against workers with particular ethnic-sounding names? We use non-random sorting into inter-ethnic marriage and salient differences between Sephardic and Ashkenazi surnames to evaluate the causal impact of Sephardic affiliation on wages. Using the 1995 Israeli Census, we estimate the effect of a Sephardic sounding surname on wages. We first compare the wages of Israeli Jewish males born to Sephardic fathers and Ashkenazi mothers (SA), who are more likely to carry a Sephardic surname, with the wages of Israeli Jewish males born to Ashkenazi fathers and Sephardic mothers (AS). We find that Israeli labour markets discriminate based on perceived ethnicity: SA workers earn significantly less than their AS counterparts. We then exploit the custom of women to adopt their husbands' surnames to disentangle actual ethnicity from the ethnicity perceived by the market. Consistent with ethnic discrimination based on surnames, we find that it is father-in-law's ethnicity--rather than father's ethnicity--that shapes female wage rates. Finally, we find that labour markets discriminate based on surname only when those names provide additional information about ethnicity. When ethnicity can be discerned from skin tone, surnames do not provide additional explanatory power with respect to wages. Copyright 2014, Oxford University Press.

Information collection and processing in financial institutions is challenging. This can delay the observation by traders of the exact capital charges and constraints of their institution. During this delay, traders face preference uncertainty. In this context, we study optimal trading strategies and equilibrium prices in a continuous centralized market. We focus on liquidity shocks, during which preference uncertainty is likely to matter most. Preference uncertainty generates allocative inefficiency, but need not reduce prices. Progressively learning about preferences generate round–trip trades, which increase volume relative to the frictionless market. In a cross section of liquidity shocks, the initial price drop is positively correlated with total trading volume. Across traders, the number of round–trips is negatively correlated with trading profits and average inventory.