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Competition and Gender Prejudice: Are Discriminatory Employers Doomed to Fail?

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  • Andrea Weber
  • Christine Zulehner

Abstract

According to Becker's (1957) famous theory on discrimination, entrepreneurs with a strong prejudice against female workers forgo profits by submitting to their tastes. In a competitive market their firms lack efficiency and are therefore forced to leave. We present new empirical evidence for this prediction by studying the survival of startup firms in a large longitudinal matched employer-employee data set from Austria. Our results show that firms with strong preferences for discrimination, i.e. a low share of female employees relatively to the industry average, have significantly shorter survival rates. This is especially relevant for firms starting out with female shares in the lower tail of the distribution. They exit about 18 months earlier than firms with a median share of females. We see no differences in survival between firms at the top of the female share distribution and at the median, though. We further document that highly discriminatory firms that manage to survive submit to market powers and increase their female workforce over time.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2842.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2842

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Keywords: firm survival; profitability; female employment; discrimination; market test; matched employer-employee data;

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References

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Citations

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Cited by:
  1. Sylvie Blasco & Barbara Pertold-Gebicka, 2012. "Employment Policies, Hiring Practices and Firm Performance," Working Papers, Centre de Recherche en Economie et Statistique 2012-27, Centre de Recherche en Economie et Statistique.
  2. Weber, Andrea & Zulehner, Christine, 2009. "Female Hires and the Success of Start-up Firms," IZA Discussion Papers 4568, Institute for the Study of Labor (IZA).
  3. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness," AMSE Working Papers 1233, Aix-Marseille School of Economics, Marseille, France.
  4. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness. Prejudiced employers in an open industry," Working Papers halshs-00793561, HAL.
  5. Fackler, Daniel & Schnabel, Claus & Wagner, Joachim, 2012. "Establishment Exits in Germany: The Role of Size and Age," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62025, Verein für Socialpolitik / German Economic Association.
  6. Rinne, Ulf, 2012. "The Evaluation of Immigration Policies," IZA Discussion Papers 6369, Institute for the Study of Labor (IZA).
  7. Krause, Annabelle & Rinne, Ulf & Zimmermann, Klaus F., 2011. "Anonymous Job Applications of Fresh Ph.D. Economists," IZA Discussion Papers 6100, Institute for the Study of Labor (IZA).
  8. Hirsch, Boris & Oberfichtner, Michael & Schnabel, Claus, 2014. "The levelling effect of product market competition on gender wage discrimination," Discussion Papers 94, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  9. Hirsch, Boris & Oberfichtner, Michael & Schnabel, Claus, 2014. "The Levelling Effect of Product Market Competition on Gender Wage Discrimination," IZA Discussion Papers 8317, Institute for the Study of Labor (IZA).

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