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

44 Pages Posted: 12 Nov 2009

See all articles by Andrea Weber

Andrea Weber

Vienna University of Economics and Business; Austrian Institute of Economic Research (WIFO); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Christine Zulehner

University of Vienna - Faculty of Business, Economics, and Statistics; Telecom ParisTech; Austrian Institute of Economic Research (WIFO); Centre for Economic Policy Research (CEPR)

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Date Written: November 2009

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.

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

JEL Classification: J16, J71, L25

Suggested Citation

Weber, Andrea Michaela and Zulehner, Christine, Competition and Gender Prejudice: Are Discriminatory Employers Doomed to Fail? (November 2009). CESifo Working Paper Series No. 2842. Available at SSRN: https://ssrn.com/abstract=1504542

Andrea Michaela Weber (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Christine Zulehner

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Oskar-Morgenstern-Platz 1
Wien, 1090
Austria

HOME PAGE: http://homepage.univie.ac.at/christine.zulehner

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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