Who benefits from minority business set-asides? The case of New Jersey

Abstract

Race-based remedies often are justified by evidence of prior discrimination. They work when they benefit groups previously disadvantaged. This article examines one such remedy—minority business set-asides—and its application in the award of public procurement and construction contracts by the state of New Jersey. Analyzed are contract awards to minority and non-minority/non-women-owned business enterprises in 1990, as well as in periods before, during, and after the imposition of a state minority set-aside program. Using a conventional decomposition approach, the article reveals significant discriminatory gaps in the success of minority- versus non-minority-owned firms in obtaining contracts from the state of New Jersey. The analysis suggests that minority contracting success rates fell from the pre-set-aside era to the set-aside era and that discriminatory outcomes persisted. The particular remedy chosen—while justified based on evidence of prior discrimination—appears not to have reduced the original discrimination nor did it unambiguously benefit minority businesses.