The State of Minority- and Women- Owned ... - Cleveland.com

Anecdotal Evidence of Disparities in the City of Cleveland’s Market Area
Some courts and other observers have asserted that findings such as those in Tables 8.3 and 8.4
tell us nothing about discrimination against M/WBEs since, even though they are current, even
though they come directly from the businesses alleging disparate treatment, even though they are
restricted to the relevant geographic and product markets, even though they are disaggregated by
procurement category, and even though they are disaggregated by race and sex, they still do not
compare firms of similar size, qualifications, or experience. We have argued elsewhere against
such flawed logic (and economics) since size, qualifications, and experience are precisely the
factors that are adversely impacted by discrimination. 310 Nevertheless, if disparities are still
observed even when such “capacity” factors are held constant, the case becomes even more
compelling. The results reported below in Table 8.5 show that even when levels of size,
qualifications, and experience are held constant across firms, measures of disparate treatment of
minority-owned businesses are still large, adverse, and statistically significant.
In Table 8.5, we report the results from a series of Probit regressions using the mail survey data
on disparate treatment. 311 As indicated earlier, the survey questionnaire collected data related to
each firm’s size, qualifications, and experience. The reported estimates from these models can be
interpreted as changes or differences in the probability of disparate treatment conditional on the
control variables. The estimates in the table show large differences in disparate treatment
probabilities between M/WBEs and non-M/WBEs. In column (1) of Table 8.5 (in which the
regression model contains only M/WBE status and procurement category indicators), the
estimated coefficient of 0.115 on the M/WBE indicator indicates that the likelihood of
experiencing disparate treatment for M/WBE firms is 11.5 percentage points higher than that for
non-M/WBE firms. 312 This difference is statistically significant within a 99 percent confidence
interval or better. Column (2) of Table 8.5 includes additional explanatory variables to hold
constant differences in the characteristics of firms that may vary by race or sex, including the
owner’s education, the age of the firm, and the size of the firm measured by employment and by
sales. Even after controlling for these differences, however, M/WBE firms remain 9.0 percentage
points more likely than non-M/WBE firms to experience disparate treatment. This difference is
also statistically significant within a 99 percent confidence interval. Firm size and other
characteristics account for little of the disparate treatment reported by M/WBEs in the Cleveland
market area.
The exercise is repeated in columns (3) and (4). The only difference is that the M/WBE indicator
is separated into two components—one for minority-owned firms and one for nonminorityfemale
owned firms. The results in column (3) indicate that minority-owned firms in the City’s
market area are 26.3 percentage points more likely to experience disparate treatment than
nonminority firms. When controls are added in column (4), this difference falls to 22.0
percentage points. Non-minority female-owned firms are 6.0 percentage points and 3.7
310 Wainwright and Holt (2010, 65-67) and Wainwright (2000, 86-87).
311 See Chapter V for a description of Probit regression.
312 This estimate largely replicates the raw difference in disparate treatment rates between M/WBE and non-M/WBE
firms reported in the last row of Table 8.3. The raw differential observed there (44.4% – 23.3% = 21.2%) differs
slightly from the 22.1% differential reported here since the regression specification also controls for industry
category.
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