How Does Collective Reputation Affect Hiring? Selection and Sorting in an Online Labour Market∗

Using data from an online labour market where the country of residence is the salient group characteristic, we document a mechanism through which collective rep-utation perpetuates group inequality. Using an IV strategy, we identify reputational externalities between an employer’s first hire and the propensity to contract more work-ers from the same country. Employers, contingent on their first worker’s performance, continue to almost exclusively hire from the same country. This coincides with a pos-itive sorting response: Observing their predecessor’s success, workers from the same country disproportionately apply and are of higher quality. Employers, facing better applicants, in turn provide higher ratings