Job Market Paper
Consider the Slavs:
Overt Discrimination and Racial Disparities in Rental Housing
Preface. I am a PhD candidate in Economics at Sciences Po (Paris), and this year
I am on the job market. This article is a summary of my job market paper. The paper has started in 2017 with a blog post (in Russian) that was covered by the media:
The Moscow Times, The Village, TV Rain.
You can also check out my website.
In the picture above, you can see the excerpts from rental housing ads published on the Russian housing marketplace Cian. Moscow landlords discriminate overtly: on average, 20% of ads include racial preferences. Discriminating landlords do not pay any fees or have other constraints for including racial preferences to the ads.
I use this unique setting to study how discrimination in the rental housing market can generate a racial rent gap.
I find that discrimination generates a sizeable racial rent gap:
non-discriminating apartment has a 4% higher rent than an identical, but
discriminating apartment in the same building

In contrast to Moscow rental housing, in other markets and countries discrimination is usually hidden from the public view. Two groups of evidence are well-documented:

(1) racial discrimination is present in many markets,

(2) there are significant disparities in economic outcomes between racial groups.

However, it is difficult to investigate the link between discrimination and disparities when discrimination is covert. My paper contributes to the literature that attempts to understand the causes of racial disparities.
I collect unique data on Moscow rental housing that includes all available ads over around 6 months. I flag ads with racial preferences and calculate the share of discriminating ads by buildings. On the map, each point is a building.
Empirical strategy
To causally identify the effect of discrimination on the rent price, I use a regression model with building-level fixed effects, which absorb geographic and building variations of the rent level. This strategy is possible due to the structure of Russian housing stock: the median building is 12-storey with around 200 apartments. There are, on average, 12 apartments available for each building in the dataset.
Strogino neighborhood. Moscow housing stock consists of multi-storey buildings with many apartments in each building.

What is the relationship between overt and covert forms of discrimination?

The link between overt and covert forms of discrimination is an important theme in the sociological literature (Small and Pager, 2020; Pager, 2007). To investigate this relationship I conduct classic correspondence experiments, sending messages with non-Russian and Russian-sounding names to a random subset of online ads.

I find that both overt and covert forms of discrimination coexist on the rental housing market in Moscow. Their relative prevalence is constant, keeping the same proportion across neighbourhoods. Thus the prevalence of overt discrimination is a good proxy for the overall level of discrimination in the neighbourhood.
How does discrimination generate the racial rent gap?

I borrow a theoretical framework from the literature on labor search with discrimination (Black, 1995) and apply it to the context of the rental housing in Moscow. This model can explain the existence of the racial rent gap.

The intuition is the following: discriminating landlords refuse to accept minority tenants at any price, which makes search more expensive for the minority. Therefore, landlords who do not discriminate increase their rent, since minority tenants tend to accept more expensive offers.
Does the racial rent gap differ between neighborhoods?

The racial rent gap is not the same across the city. Data show that it is higher in neighborhoods with:

  • Lower share of discrimination in ads
  • Higher share of non-Russian residents
  • Higher selling prices in housing
  • Higher share of residents with higher education
  • Higher share of votes for presidential candidates in ’opposition’ to Vladimir Putin

The standard model cannot explain the variation of the gap between neighbourhoods: in contrast to my empirical findings, the model predicts that the racial rent gap should be higher in neighbourhoods with a higher share of discrimination in ads. In the paper I show how adding tenants sorting between neighborhoods to the model can explain the geographic variation of the racial rent gap.

How can tenants sorting between neighborhoods explain the geographic variation of the racial rent gap?
Neighborhoods with lower share of discrimination also have a higher share of ethnically non-Russian residents. In line with the model, the higher the share of non-Russian residents in the neighborhood, the more non-discriminating landlords raise the price. Equilibrium that corresponds to my heterogeneity analysis can be obtained when a significant amount of tenants are attached to the non-discriminating neighbourhoods. It could be due to the proximity of work, schools and amenities, or due to the preference for a non-discriminating environment.

Racial discrimination can generate significant racial disparities in economic outcomes: I find that an apartment with a discriminatory ad has a 4% lower rent than an identical, but non-discriminating apartment in the same building. I also find that overt and covert forms of discrimination coexist in Moscow's rental housing market and that their relative prevalence is stable across neighborhoods. I show that these findings can be explained with a random search model including discriminating landlords and sorting of tenants.
Vladimir Avetian
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