Geopolitical Conflict Penalty within Firms

We study how the geopolitical backgrounds of immigrant owners shape firms’ pay-setting practices. Using administrative Canadian employer-employee matched data linked to the universe of historical bilateral conflicts since 1946, we compare conflict- and non-conflict-origin workers within the same firm and year. Conflict-origin workers earn 8% less than observationally similar coworkers, a penalty larger than the general immigrant earnings gap. The penalty extends into careers, with fewer major promotions and underrepresentation at the top of the within-firm pay distribution. It aggregates to the firm wage bill at the magnitude the worker-level estimate implies, while revenue per worker and profitability are unchanged. The cost falls on workers rather than firms. The penalty attenuates with worker tenure and with verifiable host-country credentials, and recent conflicts carry no larger penalty. The pattern is consistent with owners substituting group-level priors for costly individual information rather than with fixed animus.