Insiders and outsiders: Does forbidding sexual harassment exacerbate gender inequality?

This paper tests an insider-outsider model of harassment and involuntary unemployment.We exploit random assignment of appellate judges to three-judge panels and the fact that ajudge's gender and party of appointment predict outcomes in sexual harassment litigation todemonstrate a causal relationship between appellate decisions creating precedent in sexualharassment law and subsequent labor market outcomes. Consistent with an insider-outsidermodel of involuntary unemployment, forbidding sexual harassment encouraged entry ofoutsiders and reduced gender inequality along the dimensions of quantity, price, and quality, butthese ameliorative effects on gender inequality are reduced for women previously in the laborforce.