Discrimination, Migration, and Economic Outcomes: Evidence from World War I

Abstract

This paper examines the individual and aggregate costs of ethnic discrimination. Studying Germans in the U.S. during World War I, an event that abruptly downgraded their previously high social standing, we show that anti-German sentiment was strongly associated with counties' casualties in the war, leading to subsequent outmigration of Germans. Such relocation to evade discrimination was costly for German workers. However, counties with larger outflows of Germans, who tended to be well-trained manufacturing workers, incurred economic costs too, including a drop in average annual manufacturing wages of 0.6 to 2.2 percent. This effect lasted at least until 1930.