Synopsis of "Manager Race and the Race of New Hires"

I recently came across an article in the Journal of Labor Economics that examines the relationship between manager race and the race of new hires.  The central question of this analysis is whether or not the race or ethnicity of the hiring manager a determinant of the racial and ethnic composition of new hires.  The authors of the article - Laura Giuliano, David Levine, and Jonathan Leonard - examine this question using "personnel data from a large U.S. retail firm".  Based on their analysis, the authors conclude:

• Non-black managers (i.e., whites, Hispanics, and Asians) hire more whites and fewer blacks than do black managers;
• Hispanic managers hire more Hispanics and fewer whites than white managers in locations where Hispanics make up at least 30% of the population.

Three primary explanations are offered by the authors.  First, managers may use racially segregated social networks when recruiting applicants. To test for managerial hiring networks, the authors "assume that there is some congruence between social networks and residential proximity, and we ask whether managers tend to hire employees who live near them".

Second, if manager-employee similarity improves employee productivity, managers may hire racially similar employees for efficiency purposes (referred to as 'statistical' discrimination).  Finally, both managers and employees may engage in 'taste-based' discrimination (indulging personal preferences).  The authors note that these explanations are not mutually exclusive and "it is difficult to distinguish between them empirically".

This analysis may have potential implications for the use of statistical analysis in race discrimination litigation.  If the authors' conclusions are correct and one cannot differentiate empirically between 'statistical' and 'taste-based' discrimination, one could not determine empirically whether the observed racial patters are attributable to "efficiencies" or personal preferences.