To show how fast Internet affects employment in Africa, we exploit the gradual arrival of submarine Internet cables on the coast and maps of the terrestrial cable network. Robust difference-in-differences estimates from 3 datasets, covering 12 countries, show large positive effects on employment rates-also for less educated worker groups-with little or no job displacement across space. The sample-wide impact is driven by increased employment in higher-skill occupations, but less-educated workers' employment gain less so. Firm-level data available for some countries indicate that increased firm entry, productivity, and exporting contribute to higher net job creation. Average incomes rise. (JEL F14, J23, J24, J63, L86, O15, O33)Traditional trade theory predicts a decrease in inequality in developing countries during periods of integration in the global economy. The slow economic progress of poor workers in many parts of Africa, Asia, and Latin America during the last few decades, therefore, surprised economists. Two potential explanations were proposed and compared: skill-biased technological change (SBTC) and features of international trade-such as outsourcing (see e.

A body of literature suggests that ethnic heterogeneity limits economic growth. This article provides microeconometric evidence on the direct effect of ethnic divisions on productivity. In team production at a plant in Kenya, an upstream worker supplies and distributes flowers to two downstream workers, who assemble them into bunches. The plant uses an essentially random rotation process to assign workers to positions, leading to three types of teams: (i) ethnically homogeneous teams, and teams in which (ii) one or (iii) both downstream workers belong to a tribe in rivalry with the upstream worker’s tribe. I find strong evidence that upstream workers undersupply non-coethnic downstream workers (vertical discrimination) and shift flowers from non-coethnic to coethnic downstream workers (horizontal discrimination), at the cost of lower own pay and total output. A period of ethnic conflict following Kenya’s 2007 election led to a sharp increase in discrimination. In response, the plant began paying the two downstream workers for their combined output (team pay). This led to a modest output reduction in (i) and (iii) teams—as predicted by standard incentive models—but an increase in output in (ii) teams, and overall. Workers’ behavior before conflict, during conflict, and under team pay is predicted by a model of taste-based discrimination. My findings suggest that interethnic rivalries lower allocative efficiency in the private sector, that the economic costs of ethnic diversity vary with the political environment, and that in high-cost environments firms are forced to adopt “second best” policies to limit discrimination distortions.

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