From Wages to Jobs: Discrimination and Occupational Reallocation After 9/11

ABSTRACT Why do discrimination shocks generate persistent labour market differences when bias itself may be short‐lived? Existing studies focus primarily on wage effects, offering limited insight into how such shocks reshape workers' labour market trajectories. I develop a framework in which discrimination may operate through occupational reallocation, as affected workers adjust by moving across jobs, including into lower‐paying occupations. Using panel data and a difference‐in‐differences design, I exploit the September 11 attacks as an exogenous shock to bias against immigrants perceived to be associated with the Middle East. I find evidence consistent with a modest and time‐varying earnings penalty, alongside stronger patterns of reallocation, particularly shifts towards lower‐paying occupation categories among less‐educated workers. The findings illustrate how occupational reallocation may provide an additional margin through which temporary discrimination shocks generate longer‐run labour market consequences.