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Affirmative action and the utilization of minority- and women-owned businesses in highway procurement

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Abstract

The Federal Highway Administration (FHWA) mandates states' use of affirmative action when awarding federally funded road construction projects. Here I document the effectiveness of this program in increasing purchases from disadvantaged business enterprises (DBEs). Higher goals for the utilization of DBEs, both across states over time and across projects within California, is associated with a greater share of contract dollars awarded to DBEs. This effect is concentrated among minority‐owned firms and is stronger when goals are more likely to be binding and in states with an apparently stricter enforcement regime.

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... Scholars have also found that blacks face consumer discrimination and have limited opportunities to create the networks necessary to start a successful business (Bates 1993;Fairlie and Robb 2007). To alleviate the problem, governments have implemented a variety of affirmative action programs that incentivize firms to hire minority workers. 1 Existing research has found conflicting effects of these programs on black self-employment (Blanchflower and Wainwright 2005;Marion 2009Marion , 2011. ...
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... For example, to mitigate consumer discrimination government programs in the US require quotas for minority contractors in government projects. While the evidence on the benefits of these programs is mixed (Marion 2011), such laws do not cover skin tone based discrimination and therefore darker skin tone individuals may be more strongly discriminated against, and lighter skin tone Blacks may have more preferential access to consumers. ...
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An Analysis of the Impact of Affirmative Action Programs on Self-Employment in the Construction Industry Minority Business Set-Asides and Black Self-Employment Will Affirmative-Action Poli-cies Eliminate Negative Stereotypes
  • D G Blanchflower
  • J Wainwright
  • K Chay
  • R Fairlie
  • S Coate
  • G C Loury
Blanchflower, D. G., and J. Wainwright. " An Analysis of the Impact of Affirmative Action Programs on Self-Employment in the Construction Industry, " NBER Working Paper #11793, 2005. Chay, K., and R. Fairlie. Minority Business Set-Asides and Black Self-Employment. Berkeley: Mimeo, University of California, 1998. Coate, S., and G. C. Loury. " Will Affirmative-Action Poli-cies Eliminate Negative Stereotypes? " The American Economic Review, 83(5), 1993, 1220–1240.