The Economic Effect of Discrimination: Evidence from Restaurant Sector

Discrimination is a persistent phenomenon and often results in economic consequences for affected groups. I study the economic effect of discrimination on affected groups and how the effect differs across regions with different local social characteristics. I do so by leveraging a combination of recently available cell phone signal data and a unique natural experiment: the unanticipated arrival of the Covid-19 pandemic in the US. Specifically, I quantify the economic effect of consumer discrimination towards Chinese restaurants at the onset of the pandemic, proximated by the causal effect of early pandemic events on Chinese restaurants' customer visits relative to American and European restaurants. I find sizeable relative declines of about -10% in Chinese restaurant visits. Additionally, I find a remarkable amount of heterogeneity in the effect along county political affiliation and diversity in race and ethnicity: a county being one-standard-deviation more republican supporting in 2016 was associated with an additional 10% relative drop in Chinese cuisine visits; a county being one-standard-deviation more diverse in race and ethnicity was associated with an additional 8% relative increase in Chinese cuisine visits.