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

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Author Info

  • Weber, Andrea

    ()
    (University of Mannheim)

  • Zulehner, Christine

    ()
    (University of Vienna)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4526.

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Length: 41 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: Journal of the European Economic Association, 2014, 12(2), 492-521
Handle: RePEc:iza:izadps:dp4526

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

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Citations

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Cited by:
  1. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness," AMSE Working Papers 1233, Aix-Marseille School of Economics, Marseille, France.
  2. Rinne, Ulf, 2012. "The Evaluation of Immigration Policies," IZA Discussion Papers 6369, Institute for the Study of Labor (IZA).
  3. Andrea Weber & Christine Zulehner, 2010. "Female Hires and the Success of Start-Up Firms," American Economic Review, American Economic Association, vol. 100(2), pages 358-61, May.
  4. Fackler, Daniel & Schnabel, Claus & Wagner, Joachim, 2012. "Establishment exits in Germany: The role of size and age," Discussion Papers 76, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  5. Krause, Annabelle & Rinne, Ulf & Zimmermann, Klaus F., 2012. "Anonymous job applications of fresh Ph.D. economists," Economics Letters, Elsevier, vol. 117(2), pages 441-444.
  6. Blasco, Sylvie & Pertold-Gebicka, Barbara, 2012. "Employment Policies, Hiring Practices and Firm Performance," IZA Discussion Papers 7013, Institute for the Study of Labor (IZA).
  7. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness. Prejudiced employers in an open industry," Working Papers halshs-00793561, HAL.

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