Sexual Harassment in the Workplace: An Economic Analysis with Implications for Worker Rights and Labor Standards Policy

45 Pages Posted: 19 Mar 2002

See all articles by Kaushik Basu

Kaushik Basu

Cornell University - Department of Economics; Harvard University - Harvard Institute of Economic Research; IZA Institute of Labor Economics; World Bank

Date Written: February 2002


Suppose a firm has a widespread reputation for sexually harassing its workers (or it follows the practice of telling workers that if they wish to work for the firm they must be prepared for sexual harassment). When a worker offers to work for such a firm and is accepted, there is, therefore, a Pareto improvement. Is there a case for banning such "contractual" sexual harassment? This paper argues that the answer is yes, and that we can be both Paretian and ask for a ban. A general principle, called the large-numbers argument, is developed to justify this and it is shown that there are other areas, such as occupational safety where this principle can be applied. That is, there may be a case for preventing firms from exposing its workers to excessive hazards even when each worker finds the pay attractive enough to want to submit to this. Hence, this argument provides a general principle for deciding which market transactions ought to be banned as obnoxious, instead of relying on ad hoc judgments. The paper goes on to discuss how our sexual harassment laws ought to be reformed so as to be more receptive to the needs of society.

Keywords: Sexual Harassment, occupational safety, discrimination, labor standards

JEL Classification: J30, J78, D00

Suggested Citation

Basu, Kaushik, Sexual Harassment in the Workplace: An Economic Analysis with Implications for Worker Rights and Labor Standards Policy (February 2002). MIT Department of Economics Working Paper No. 02-11. Available at SSRN: or

Kaushik Basu (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-2525 (Phone)
607-255-2818 (Fax)

Harvard University - Harvard Institute of Economic Research ( email )

Department of Economics
200 Littauer Center
Cambridge, MA 02138
United States
617-495-8161 (Phone)
617-495-8570 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

World Bank

1818 H Street NW
Washington, DC 20433
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information