Abstract
Sexual harassment in the workplace is common, with an estimated 40-60 percent of women and 10 percent of men being harassed at work. Empirical evidence from social psychology emphasizes social norms, power, accountability and organizational tolerance as the key determinants of sexual harassment. Economic theory indicates that misaligned incentives expose workers to quid pro quo sexual harassment. Low powered incentives for supervisors and high-powered incentives for workers increase sexual harassment. In order to test these theories, we conduct a quasi-experiment in the context of Better Factories Cambodia that induces exogenous variation in norms, power, organizational tolerance, reporting systems and worker pay. We measure the impact of the treatment effect of the program on the theoretical variables and the factory structure and how those variables impact sexual harassment. We find strong evidence for the theory that incentives, power and organizational tolerance determine sexual harassment. Further, the main channel of BFC’s impact on reducing sexual harassment is through pay incentives. Enforcement of minimum wage laws reduces the fraction of worker pay that is linked to productivity. Reducing productivity-linked pay, in turn, reduced vulnerability to quid pro quo sexual harassment.