We study how the geopolitical backgrounds of immigrant owners shape firm pay policy. Using administrative Canadian employer-employee matched data from 2001 to 2017, we document that workers from countries with historical armed conflict with their firm owner’s origin country earn significantly less than their observationally equivalent coworkers, a penalty 50% larger than the general immigrant earnings gap. These out
comes cannot be explained by differences in worker quality, productivity, or bargaining power. We find that the penalty (i) is substantially smaller in firms with concentrated ownership, where owners internalize screening costs, (ii) attenuates with tenure and credible signals of quality, which resolve uncertainty, and (iii) increases with firm size and does not scale with conflict recency. The results imply an information friction that owners rely on negative geopolitical priors when screening costs are high. Firms with such conflict penalties show no productivity loss, suggesting they extract rents from mispriced labor. Conflict-origin workers are systematically allocated to lower-status positions and face a persistent glass ceiling. These findings reveal how macro-geopolitical
tensions create micro-level information frictions that persist across borders and gener
ations.
