#MeToo meets the mutual fund industry: productivity effects of sexual harassment.

• First to study sexual harassment as a friction to optimal utilization of human capital. • The Harvey Weinstein scandal used as a positive shock that reduced sexual harassment. • Reducing the threat of sexual harassment in the workplace improves productivity. • Performance of female fund managers increases after the Harvey Weinstein scandal. Sexual harassment, a widespread problem in the workplace, keeps female employees from optimally employing their human capital. We show that removing or diminishing this friction improves productivity. Specifically, using the male-dominated fund industry as our testing ground, we show that productivity of female mutual fund managers significantly increased after the Harvey Weinstein scandal and the onset of the #MeToo movement. Evidence from lawsuits and organizational changes at several fund companies also suggests that reducing the threat of sexual harassment improves productivity. Our results have important implications for the policy debate on workforce diversity and costs of sexual harassment. [ABSTRACT FROM AUTHOR]