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Chicago Booth’s Kilian Huber and University of Munich’s Volker Lindenthal and Fabian Waldinger draw their conclusion from a study of companies in Nazi Germany. Purging Jewish managers from German companies reduced the aggregate market valuation of all companies listed on the Berlin Stock Exchange by approximately 5 percent between 1933 and 1943, or nearly 2 percent of the German gross national product, they find.
The researchers collected data on 30,000 managerial positions at German companies that had been listed on the Berlin Stock Exchange in 1932, when Hitler was on the path to becoming the leader of the country. At the time, Jews held about 15 percent of senior management positions in these companies.
After the Nazis took power in 1933, those managers either left or were forced out of their positions. The share prices of these companies then declined relative to companies that had never employed Jewish executives. The share prices of companies that lost Jewish managers started falling in 1933 and remained persistently 10 percent lower than the share prices of peer companies that had never had Jews in senior positions.
Dividend payments and returns on assets also fell significantly after 1933 for companies affected by the purge. Companies that lost Jewish managers saw dividends fall by 7.5 percent, while returns on assets fell about 4 percentage points. This means that the loss of Jewish managers led to real losses in efficiency and profitability.
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The Economic Case for Accepting RefugeesThe issue, according to the researchers, is likely that the companies affected by the purge lost the beneficial characteristics of these senior managers. Jewish managers were twice as likely to hold the honorary title of kommerzienrat (councillor of commerce) and two and a half times as likely to have held a supervisory position in another company. Huber, Lindenthal, and Waldinger find that the total number of executives with managerial experience fell, as did the total number of managers with university degrees. Some 45 percent of Jewish managers held university degrees, compared with 36 percent overall. The number of connections these companies had to others, in the form of seats on other companies’ boards, fell substantially as well.
The Nazi era in Germany is an extreme example of systematized discrimination against a particular group of individuals, acknowledge the researchers, but they write that “even less severe forms of discrimination can lead to a loss of talent.” The US travel ban is one such example, write Huber, Lindenthal, and Waldinger. Highly paid continental Europeans leaving the United Kingdom as a result of Brexit could also bring negative consequences.
Kilian Huber, Volker Lindenthal, and Fabian Waldinger, “Discrimination, Managers, and Firm Performance: Evidence from ‘Aryanizations’ in Nazi Germany,” CEPR discussion paper, January 2019.
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