Do employers avoid hiring workers from poor neighborhoods? Experimental evidence from the real labor market*

• Published date: 01 April 2023
• Author: Magnus Carlsson,Stefan Eriksson
• Date: 01 April 2023
• DOI: http://doi.org/10.1111/sjoe.12509

Scand. J. of Economics 125(2), 376–402, 2023

DOI: 10.1111/sjoe.12509

Do employers avoid hiring workers from

poor neighborhoods? Experimental evidence

from the real labor market*

Magnus Carlsson

Linnaeus University, SE-391 82 Kalmar, Sweden

magnus.carlsson@lnu.se

Stefan Eriksson

Uppsala University, SE-751 20 Uppsala, Sweden

stefan.eriksson@nek.uu.se

Abstract

We investigate whether employers avoid hiring workers who live in neighborhoods with low

socio-economic status and/or with long commuting times. In a large-scale f‌ield experiment in

the Swedish labor market, we sent more than 4,000 f‌ictitious r´

esum´

es, with randomly assigned

information about the applicants’ residential locations, to f‌irms with advertised vacancies. Our

f‌indings show that commuting time has a negative effect on the likelihood of being contacted by

an employer, while the socio-economic status of a neighborhood does not appear to be important.

These results offer guidance for policymakers who are responsible for reversing segregation

patterns.

Keywords: Correspondence study; employer discrimination; neighborhood signaling effects;

spatial mismatch

JEL classif‌ication:J23; J71; R23

1. Introduction

Most major cities are socio-economically segregated, and these inequalities

have tended to worsen over time (Tammaru et al., 2016). Disadvantaged

populations often live in suburban areas characterized by low levels of

employment, low incomes, and high crime rates. These areas are often

located far away from job opportunities. It is fundamental to understand the

factors that explain the observed socio-economic segregation – not least for

policymakers who have ambitions to reverse this trend.

The existing research has recognized that labor supply factors play an

important role in socio-economic segregation (Ellen and Turner, 1997;

*We thank Olof Axman for providing excellent research assistance. Financial support from the

Swedish Research Council for Health, Working Life and Welfare (FORTE grant number dnr

2013-2482) is gratefully acknowledged.

c

2022 The Authors. The Scandinavian Journal of Economics published by John Wiley & Sons Ltd on behalf of F¨

oreningen

f¨

or utgivande av the SJE.

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution

and reproduction in any medium, provided the original work is properly cited.

M. Carlsson and S. Eriksson 377

Durlauf, 2004; Galster, 2012). Several studies have highlighted the importance

of education and social capital being accessible through neighborhood peers

and role models within the neighborhood (Wilson, 1987; Borjas, 1995). It has

been shown that exposure to a culture in which joblessness, dropping out of

school, and committing crimes are accepted could affect both human capital

accumulation and views and expectations related to labor force participation

and crime (Katz et al., 2001; Clampet-Lundquist and Massey, 2008; Brattbakk

and Wessel, 2013; Galster et al., 2015; Chetty et al., 2016). Long distances to

areas where jobs are located could also increase segregation by lowering job

search intensity either because of the higher transportation costs or because

of the search costs that might arise if information about job openings is less

accessible.

However, much less is known about the importance of labor demand

factors for socio-economic segregation. Theoretically, two distinct factors

on the demand side can explain why employers might be reluctant to hire

workers living in economically deprived areas. First, prior to hiring, it is often

diff‌icult to assess the human capital and productivity of job applicants; hence,

employers might use easily observable characteristics, such as applicants’

residential locations, as a sorting criterion. This is especially likely to occur

in cases where employers associate a neighborhood with characteristics they

perceive as negative, such as low levels of employment, low incomes, high

fractions of ethnic minorities, and high crime rates. The result could be

statistical discrimination (Phelps, 1972), where workers living in deprived

areas are not hired by employers. There could also be redlining, where

f‌irms or public authorities do not want to participate in activities with

residents of certain neighborhoods, for example, where ethnic minorities live

(Hillier, 2003; Small and Pager, 2020).1Second, employers could be reluctant

to hire workers who live far away from the workplace. A long commuting

time could result in expectations that workers will arrive late, or tired, to

work, continue their job search after being hired, or have low productivity

because of having few other options.2Such concerns could also result in

statistical discrimination.

In this study, we empirically examine possible neighborhood effects by

investigating whether employers act on socio-economic factors associated

with certain neighborhoods, that is, neighborhood signaling effects (Zenou

and Boccard, 2000), or if they do not want to hire workers with long commuting

1The term redlining was coined by sociologist John McKnight in the 1960s and typically refers

to the practice of denying (f‌inancial) services to residents based on their neighborhood’s racial

or ethnic composition.

2There is some empirical evidence that workers with long commuting distances are less

productive (e.g., van Ommeren and Guti´

errez-i-Puigarnau, 2011).

c

2022 The Authors. The Scandinavian Journal of Economics published by John Wiley & Sons Ltd on behalf of F¨

oreningen

f¨

or utgivande av the SJE.