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 a judge's gender and party of appointment predict outcomes in sexual harassment litigation to demonstrate a causal relationship between appellate decisions creating precedent in sexual harassment law and subsequent labor market outcomes. Consistent with an insider-outsider model of involuntary unemployment, forbidding sexual harassment encouraged entry of outsiders and reduced gender inequality along the dimensions of quantity, price, and quality, but these ameliorative effects on gender inequality are reduced for women previously in the labor force.
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