American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Affirmative Action Exemptions and Capacity Constrained Firms
American Economic Journal: Economic Policy
(pp. 377–407)
Abstract
This paper studies how affirmative action exemptions in public procurement can improve efficiency and government expenditures without harming disadvantaged business enterprise (DBE) utilization. I examine a unique program employed by the Iowa Department of Transportation, where prior to 2013 prime contractors were allowed an exemption from a project's affirmative action requirement if their history of DBE utilization was sufficiently high. I find that prime contractors use the exemption to smooth demands on capacity constrained DBEs, building a history of utilization during low demand periods and exploiting the resulting exemption during high demand. The exemption policy was unexpectedly eliminated in 2013, which I exploit to evaluate its effect on DBE utilization and procurement costs. I find that average DBE utilization was unchanged and bids rose on affirmative action contracts.Citation
Marion, Justin. 2017. "Affirmative Action Exemptions and Capacity Constrained Firms." American Economic Journal: Economic Policy 9 (3): 377–407. DOI: 10.1257/pol.20150498Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- H76 State and Local Government: Other Expenditure Categories
- J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- J16 Economics of Gender; Non-labor Discrimination