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Affirmative Action Exemptions and Capacity Constrained Firms

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  • Justin Marion

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.

Suggested Citation

  • Justin Marion, 2017. "Affirmative Action Exemptions and Capacity Constrained Firms," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 377-407, August.
    • Handle: RePEc:aea:aejpol:v:9:y:2017:i:3:p:377-407
    Note: DOI: 10.1257/pol.20150498
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    Citations

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    Cited by:

    1. Rosa, Benjamin V., 2020. "Affirmative action subcontracting regulations in dynamic procurement auctions," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    2. De Silva, Dakshina G. & Hubbard, Timothy P. & Kosmopoulou, Georgia, 2020. "An evaluation of a bidder training program," International Journal of Industrial Organization, Elsevier, vol. 72(C).

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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