Regulatory Spillover and Workplace Racial Inequality

Abstract

This article suggests that regulations targeting the U.S. public sector may influence racial inequality in the private sector. Since the 1990s, nine states have banned affirmative action practice in public universities and state governments. I theorize that although these bans have no legal jurisdiction over private-sector firms, they could influence such firms normatively. After such a ban, executives who have been skeptical of Equal Employment Opportunity (EEO) policies may feel more normative license to reduce commitment to EEO practices. Using a difference-in-differences estimation on 11,311 firms from 1985 to 2015, I find that the bans are indeed associated with slower racial progress in private-sector firms: after a state adopts the affirmative action ban, growth in the proportion of Black managers in establishments with corporate headquarters in that state slows by more than 50 percent, and this slowdown is mostly concentrated in firms with politically conservative CEOs. These findings suggest a mechanism for the persistence of racial inequality and show that regulations can influence actors well beyond legal jurisdictions.