Insiders and Outsiders: Does Forbidding Sexual Harassment Exacerbate Gender Inequality?

Sexual harassment is perceived to be a major impediment to female labor force participation. Using novel data on all workplace sexual harassment precedent in US Circuit Courts from 1982-2002, we exploit the random assignment of US appellate judges and the fact that a judge’s gender and party of appointment predict decisions in sexual harassment cases to demonstrate the causal impact of pro-plaintiff sexual harassment precedent on the adoption of sexual harassment human resources policies and reduction in gender inequality. Consistent with an insider-outsider model of involuntary unemployment, forbidding sexual harassment encouraged entry of outsiders and reduced gender inequality along the dimensions of quantity and price, particularly in the construction industry, which was heavily affected by sexual harassment litigation, but these ameliorative effects are reduced for insider women. Pro-plaintiff decisions spurred the adoption of sexual harassment human resources policies by 4.8 percentage points and increased female employment shares by 0.4 percentage points.