Firm discrimination against minorities and entrepreneurship: Evidence from the Employment Non-discrimination Acts

We study institutional changes designed to improve the work conditions of minority employees and their effect on entrepreneurship. We propose that these changes might have contrasting effects on the quantity and quality of new firms founded. On the one hand, institutions designed to suppress workplace discrimination will increase the appeal of paid employment relative to entrepreneurship, thus leading to fewer new ventures. On the other hand, such institutions will motivate the pursuit of higher-potential opportunities, thus leading to a higher quality of new ventures. We test our predictions exploiting a quasi-natural experiment provided by the staggered enactment of Employment-NonDiscrimination-Acts (ENDAs) in the US. Consistent with our theory, we find that ENDAs reduce the quantity of entrepreneurship but increase its quality.

Contact Zhiyan Wu (z.wu@rsm.nl) for the Zoom link