The Civil Rights Act of 1991 (CRA91) was enacted
after a rancorous debate about whether it was a "quota" hiring
bill or a necessary means of opening labor markets. In this paper,
we analyze the effects of CRA91 on firms' labor demand. We model
employer behavior when firms vary exogenously in their susceptibility
to discrimination suits and when firms can reduce their exposure
to discrimination claims by employing more protected workers.
These forces lead to a sorting effect, which causes firms that
are more susceptible to discrimination litigation to substitute
away from protected workers, and a quota effect, which causes
firms with fewer pre-CRA91 protected workers to substitute toward
these workers. We examine these effects empirically using data
from the Current Population Survey, the EEOC, and the Census Bureau.
We find that trends in employment shares of protected workers
changed after CRA91 in a manner consistent with the sorting effect.
We also find that EEOC complaint rates vary substantially across
industries and are negatively correlated with protected-worker
employment.
Paul Oyer, Department
of Management and Strategy, Kellogg Graduate School of Management,
Northwestern University
Scott Schaefer, Department of Management and
Strategy, Kellogg Graduate School of Management, Northwestern
University
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