presents an important additional cost of labor market discrimination to job seekers, especially in a setting with high transport costs like South Africa.<sup>5</sup> These findings complement recent evidence from the U.S. by Pager and Pedulla (2015) who document that perceived discrimination among African Americans is associated with applying to a wider range of jobs.

Last, this study hopes to contribute to the literature on the nature of discrimination.<sup>6</sup> Altonji and Pierret (2001, AP henceforth) aim to distinguish between statistical and taste discrimination by testing how the effect of observable characteristics on wage develop over time. According to the statistical discrimination theory, observable characteristics such as education and race should explain less of wage levels over time as employers learn about harder to observe determinants of productivity.<sup>7</sup> Building on the AP employer learning model, I find that employer demand _diverges_ between South Africans and foreigners once more information is revealed on the applicants’ profile. This is consistent with a model in which employers _positively_ statistically discriminate against foreigners. Results from an anonymous survey I conduct with 208 domestic workers supports this conclusion: I find that immigrants have characteristics (e.g. age, education) favored by employers.

There are other differences between South African and foreign workers which may explain the results. Employers may refrain from selecting foreigners due to uncertainty of their legal status. However, I find that among foreign job seekers, those that indicate they have a work permit receive about 8% _fewer_ profile clicks. The South African government suspects that some employers prefer hiring undocumented foreigners because they have less bargaining power and are thus more exploitative (DoL 2007). Alternatively, revealing that one has a work permit may also signal a higher reservation wage to employers. Results from the survey paint a subtle picture: undocumented immigrants do not have lower reservation wages or are paid lower wages than documented immigrants or South

> 5Kerr (2015) estimates that household spend on average 11% of their income on transport cost and that modes like trains or buses impose an effective tax rate of 25-30% on hourly wages.

> 6The theory of statistical discrimination was pioneered by Phelps (1972) who reasoned that in a world of asymmetric information, employers assess the expected productivity of workers according to the average of the population with similar observable characteristics. Labor market discrimination can result when observable characteristics like race or gender are used by employers to infer information about productivity. By contrast, according to Gary Becker’s model of taste-based discrimination, employers have discriminatory tastes and are thus willing to pay in order to not hire certain groups (Becker (1957)). While existing audit studies (Bertrand and Mullainathan (2004); Oreopoulos (2011)) credibly show that discrimination exists in the screening process, they do not provide conclusive evidence on the source of discrimination (Lang and Lehmann (2012)). For example, a lower return to more credentials is at odds with both the taste and statistical discrimination approach (Bertrand and Mullainathan (2004)).

> 7The authors find little support for a model of statistical discrimination by race: while the coefficient on education falls, the negative coefficient for black race persists. One concern with this interpretation is that the discriminated group may face additional forms of discrimination such as being omitted in promotion decisions due to reasons of statistical discrimination, which may explain the persistent negative effect on race.

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