Working Paper

The Gender Pay Gap: Micro Sources and Macro Consequences

Abstract: Using linked employer-employee data from Brazil, we document a large gender pay gap due to women working at lower-paying employers with better amenities. To interpret these facts, we develop an equilibrium search model with endogenous firm pay, amenities, and employment. We provide a constructive proof of identification of all model parameters. The estimated model suggests that amenities are important for men and women, that compensating differentials explain half of the gender pay gap, and that there are significant output and welfare gains from eliminating gender differences. However, equal-treatment policies fail to achieve those gains.

Keywords: Monopsony; Amenities; Earnings inequality; Linked employer-employee data; Equilibrium search model; Taste-based discrimination; Worker and firm heterogeneity; Compensating differentials;

JEL Classification: J16; J32; E24; J31;

https://doi.org/10.21034/iwp.78

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Opportunity and Inclusive Growth Institute Working Papers

Publication Date: 2023-09-06

Number: 078