Estimating a Dynamic Adverse-Selection Model: Labor Force Experience and the Changing Gender Earnings GAP1 (original) (raw)
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The Review of Economic Studies, 2012
This paper addresses two questions: What accounts for the gender gap in labor-market outcomes? What are the driving forces behind the changes in the gender-labor-market outcomes over the period 1968-97? It formulates a dynamic general equilibrium model of labor supply, occupational sorting and human capital accumulation in which gender discrimination and an earnings gap arise endogenously. It uses this model to quantify the driving forces behind the decline in the gender earnings gap and the increase in women's labor-force participation, professional-occupation representation and hours worked. It …nds that labor-market experience is the most important factor explaining the gender earnings gap. In addition, statistical discrimination accounts for a large fraction of the observed gender earnings gap and its decline. It also …nds that a large increase in aggregate productivity in professional occupations plays a major role in the increase in women's labor-force participation, professional-occupation representation and hours worked. Although of less importance, demographic changes account for a substantial part of the increase in female labor-force participation and hours worked, whereas home-production technology shocks do not.
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Labor Market Experience and the Gender Gap
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Once educational attainment and other observable characteristics have been controlled for, studies show that the gender wage gap among adult full-time workers is about half the size it was in 1980. Using U.S. Census and Current Population Survey (CPS) data from 1959 through 1999, the authors investigate the extent to which the decline in this gap was associated with changes across cohorts in the relative rate of wage growth after labor market entry (slopes), versus changes in relative earnings levels at labor market entry (levels). They find that slope changes associated with post-schooling investments, including work experience, account for no more than one-third of the narrowing of the gender wage gap over the past 40 years. The majority of the narrowing can be attributed to factors present at the time that successive cohorts entered the labor market, such as a growing demand for women's unobserved skills or declining discrimination.
The Gender Earnings Gap: Measurement and Analysis
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We analyse how the rising labor force participation of women influences the distribution of the gender pay gap. We formulate an equilibrium model of the labor market in which the elasticity of substitution between male and female labor varies with the task content of occupations. We structurally estimate the parameters using individual data from Mexico through the recent 25 years when women's labor force participation increased by fifty percent. We provide new evidence that male and female labor are closer substitutes in high-paying abstract task-intensive occupations than in lower-paying manual and routine task-intensive occupations. Consistent with this, we find a widening of the gender pay gap at the lower end of the distribution, alongside a narrowing towards the top. We also find that demand side trends favored women, attenuating the supply-driven negative pressure on women's wages, and more so among collegeeducated workers in abstract-intensive occupations. The paper presents new evidence on the distribution of the gender wage gap, and contributes to a wider literature on technological change, occupational sorting and wage inequality between and within gender.
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This research examines how structural features of a labor market affect the size of the malefemale earnings differential in that market. Theoretical predictions are tested using data on the earnings of male and female academics in the US. Measures of labor market structure are shown to be significantly associated with the size of the earnings differential in 56 labor markets corresponding to specific academic disciplines. As predicted, an oversupply of labor within a market and greater career embeddedness in a single organization within a market increased the size of the earnings gap between men and women. Contrary to predictions, greater flows of information in the market and market permeability had no impact on the size of the earnings differential within markets. In addition, higher percentages of women in the market decreased the wage differential within markets. Additional analysis at the individual level found that men were penalized less than women when labor market conditions led to lower wages. Findings generally support the theoretical position that structural characteristics of the labor market affect the ability of employers to engage in salary discrimination against women.
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Selection, Investment, and Women's Relative Wages Over Time*
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