What Happens to Contractors After States Ban Affirmative Action? -- by Benjamin Rosa

Using restricted Census business records, I explore how banning affirmative action in state contracting affects minority- and women-owned business enterprises (MWBEs). I find that ending affirmative action led MWBE contractors to gradually downsize, with the most pronounced reductions in force experienced by Black-owned businesses and larger MWBEs. Despite these workforce changes, existing MWBEs were no more likely to shut down than other businesses. New MWBEs were relatively less common after a state's ban, highlighting how bans can shift the demographic composition of new contractors. A calibrated model suggests bans are equivalent to considerable reductions in MWBE productivity and scrap values.