Insiders, Outsiders, and Involuntary Unemployment

Abstract

Sexual harassment is perceived to be a major impediment to female labor force participation. We use the random assignment of U.S. federal judges setting geographically-local precedent, and the fact that judges’ biographies predict decisions in sexual harassment cases, to document the causal impact of forbidding sexual harassment. Consistent with an insider-outsider theory of involuntary unemployment, but in contrast to a mandated benefits theory of employment protections, pro-plaintiff sexual harassment precedent spurred the adoption of sexual harassment human resources policies, encouraged entry of outsiders, and reduced gender inequality in labor supply and wages among the population. These effects were comparable to the effects of the Equal Employment Opportunity Act and greatest in the construction industry, which was heavily affected by sexual harassment litigation.

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Reference

Daniel L. Chen, and Jasmin Sethi, “Insiders, Outsiders, and Involuntary Unemployment: Sexual Harrassment Exacerbates Gender Inequality”, TSE Working Paper, n. 16-687, August 2016.