This paper characterizes the differences in incentives to respond adversely to the Civil Rights Act of 1991 CRA91 across firm size. I then empirically test the firm responses and compare them to the incentives. I find that responses across firm size match the incentive differences. Thus firms appear to be rational as well as fully informed. The most pronounced adverse response comes from large firms. Firms with more than 100 employees reversed a trend of increasing employment at a rate of 0.28 weeks worked per year prior to CRA91 to a trend of decreasing employment at a rate of −0.21 weeks per year. Since this group employs 63.7 of the workforce, this has a profound impact on opportunities for protected groups.
Small Business Economics – Springer Journals
Published: Mar 9, 2004
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