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Affirmative action programs are commonly used as a means to level the playing field for minority- and women-owned firms in public procurement markets, and therefore may be a positive factor in business entry and survival. To the extent that affirmative action programs also apply to traditional labor markets, however, they may also alter the opportunity cost of starting a business. The authors utilize the elimination of affirmative action in California and Washington through voter initiatives to identify the effect of affirmative action on minority and female self-employment rates.
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