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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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Bibliographic Info

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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  1. Sandra E. Black & Elizabeth Brainerd, 2004. "Importing equality? The impact of globalization on gender discrimination," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 57(4), pages 540-559, July.
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Cited by:
  1. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness. Prejudiced employers in an open industry," Working Papers halshs-00793561, HAL.
  2. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness," AMSE Working Papers 1233, Aix-Marseille School of Economics, Marseille, France.
  3. Andrea Weber & Christine Zulehner, 2009. "Female Hires and the Success of Start-up Firms," Ruhr Economic Papers 0151, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Rinne, Ulf, 2012. "The Evaluation of Immigration Policies," IZA Discussion Papers 6369, Institute for the Study of Labor (IZA).
  5. Blasco, Sylvie & Pertold-Gebicka, Barbara, 2013. "Employment policies, hiring practices and firm performance," Labour Economics, Elsevier, vol. 25(C), pages 12-24.
  6. Daniel Fackler & Claus Schnabel & Joachim Wagner, 2013. "Establishment exits in Germany: the role of size and age," Small Business Economics, Springer, vol. 41(3), pages 683-700, October.
  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).

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