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

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Author Info

  • 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 com- petitive 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 espe- cially 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 The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria in its series NRN working papers with number 2009-26.

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Length: 40 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:jku:nrnwps:2009_26

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Related research

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. 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.
  2. Blasco, Sylvie & Pertold-Gebicka, Barbara, 2012. "Employment Policies, Hiring Practices and Firm Performance," IZA Discussion Papers 7013, Institute for the Study of Labor (IZA).
  3. 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).
  4. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness. Prejudiced employers in an open industry," Working Papers halshs-00793561, HAL.
  5. 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.
  6. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness," AMSE Working Papers 1233, Aix-Marseille School of Economics, Marseille, France.
  7. Rinne, Ulf, 2012. "The Evaluation of Immigration Policies," IZA Discussion Papers 6369, Institute for the Study of Labor (IZA).

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