This paper shows that small establishments are much less likely to hire and employ blacks than are larger establishments. A number of possible explanations for this result are considered, such as differences across establishments in application rates from blacks, skill needs, locations, and recruiting behavior. Although these factors can account for some of the observed differences in race of new hires between small and large establishments, much remains unexplained. The results suggest that discrimination in hiring may be much more pervasive at smaller establishments than larger ones.

Harry J. Holzer is a professor of economics at Michigan State University. He thanks John Bound and David Neumark for helpful comments, Jess Reaser for computational assistance, and the Rockefeller Foundation for financial assistance. The data used in this article can be obtained beginning March 1999 through February 2002 from the author.