Product Market Competition and Gender Discrimination

Abstract

This paper presents novel empirical evidence for the prediction from Beckerís (1957) famous theory, that competition drives discrimination out of the market. We use a comprehensive business registration reform in Portugal as a quasi-natural experiment to study the e§ect of increased product market competition on gender discrimination. We use employeremployee data for the universe of private sector Örms and workers, and exploit the staggered implementation of the reform across municipalities for identiÖcation. Increased competition following the reform increases growth of the female employment share and reduces the gender pay gap for middle-managers and for medium- and high-skilled workers but not for top-managers or the unskilled. We also Önd that discriminatory employers, approximated by a low female employment share, are more likely to exit and those that survive reduce overall employment growth following the reform, while non-discriminatory employers grow faster. Existing evidence has shown that gender discrimination reduces output; our Öndings suggest that entry deregulation can contribute to reduce ine¢ ciencies arising from gender discrimination.