Since the main focus of this seminar is on female labor supply the relative wage of women is an important factor. Over the past 100 years women labor force participation increased sharply and women are often even higher educated than men. Despite these facts there is still a huge wage gap between female and male workers in virtually all developed countries. Equal access to jobs and equal treatment within a firm by gender is guaranteed by legislation in most of the developed economies, still firms pay female and male workers differently.
The bargaining and sorting effect may contribute to these differences. The former effect suggests that women may negotiate less aggressively than men and therefore receive a smaller share of the surplus generated by their job. The latter effect suggests that women tend to move to lower-paying jobs. Since there was no comprehensive economic research of both strands the underlying Card et al. provides the first comprehensive analysis of the impact of firm-specific pay premiums on the gender wage gap.
Table of Contents
1. Introduction
2. Institutional Setting and Data Overview
3. Modeling Framework
3.1. Exogeneity
3.2. Normalization
3.3. Decomposition of the Firm Specific Pay Premium
4. Descriptive Evidence for Exogeneity and Restrictive Assumptions
5. Estimation Results
5.1. Decomposition of the Pay Premium Based on Firm Effects
5.2. Impact of Occupation
5.3. Within Firm Changes in Profitability and Wages
6. Conclusion, Shortcomings, Open Questions and Possible Extensions
7. References
8. Figures and Tables
Research Objectives and Key Topics
This paper examines the impact of firm-specific pay premiums on the gender wage gap, utilizing an extensive employer-employee dataset from Portugal. It aims to decompose the gender wage differential by identifying the extent to which sorting (differential distribution of men and women across firms) and bargaining (differential shares of firm-specific surplus) contribute to existing wage inequalities.
- Analysis of firm-specific pay premiums and their role in gender-based wage disparities.
- Application of an Oaxaca-type decomposition to separate bargaining and sorting channels.
- Investigation of worker mobility and its relationship to firm productivity and wage premiums.
- Evaluation of how age, education, and occupation influence the relative bargaining power of women.
- Exploration of how profitability shocks within firms impact wages differently by gender.
Excerpt from the Book
3. Modeling Framework
The authors now develop an econometric model to evaluate the effects of firm-specific pay premiums on the observed wages. Starting by indexing groups of workers by i ∈ {1, ..., N} in multiple periods t ∈ {1, ..., T}. Denoting workers gender by G(i) with values {F, M}, the identity of the respective employer in a given year by J(i, t) with values {1, ..., J} referring to a particular gender as g and a particular firm as j.
Then the authors posit a rent-sharing model with wit as the log of the wage of the individual i in period t:
wit = ait + γG(i)Sij(i,t)t (1)
Here ait is standing for the alternative wage available for worker i in period t, Sij(i,t)t ≥ 0 is the match surplus between worker i and firm J(i, t) in period t which will later be decomposed into three components, and γg ∈ [0,1] g ∈ {F, M} a gender-specific share of the surplus which is a major factor of interest, especially the comparison i.e. γF < γM.
Summary of Chapters
1. Introduction: This chapter contextualizes the gender wage gap and introduces the study's objective to analyze firm-specific pay premiums as a potential driver of wage inequality.
2. Institutional Setting and Data Overview: This section details the use of a rich, matched Portuguese employer-employee dataset and highlights the institutional similarities that make the findings relevant to broader economic contexts.
3. Modeling Framework: The authors establish a rent-sharing econometric model to decompose wage premiums into bargaining and sorting effects, incorporating worker ability, firm productivity, and match-specific surplus.
4. Descriptive Evidence for Exogeneity and Restrictive Assumptions: This chapter provides empirical validation of the research model by examining worker mobility patterns and ensuring that trends do not introduce systematic bias into the wage estimations.
5. Estimation Results: The chapter presents the statistical findings, demonstrating that worker characteristics account for a large share of wage inequality, while firm effects and bargaining differences contribute significantly to the gender gap.
6. Conclusion, Shortcomings, Open Questions and Possible Extensions: The final chapter summarizes that lower female bargaining power and sorting into lower-paying firms drive a significant portion of the gender wage gap and suggests future research directions.
Keywords
Gender Wage Gap, Firm-Specific Pay Premiums, Rent-Sharing Model, Bargaining Effect, Sorting Effect, Labor Economics, Employer-Employee Data, Wage Inequality, Portugal, Productivity, Value-Added, Worker Mobility, Gender Identity Norms, Wage Decomposition, Labor Supply
Frequently Asked Questions
What is the core focus of this research?
The research investigates the causes of the persistent gender wage gap in developed economies, specifically focusing on how firm-level factors—such as rent-sharing and job placement—contribute to salary differences between men and women.
What are the primary thematic fields covered?
The main themes include labor market economics, gender-based wage differentials, the impact of firm-specific premiums, and the decomposition of earnings inequality into bargaining and sorting components.
What is the primary goal of the study?
The primary goal is to quantify the relative contribution of two specific channels—the "bargaining effect" (negotiation power) and the "sorting effect" (distribution of workers across firms)—to the overall gender wage gap.
Which scientific methods are employed?
The authors utilize a two-way fixed effects model (Abowd et al. framework) combined with an Oaxaca-type decomposition to empirically analyze worker-firm data and isolate gender-specific wage effects.
What topics are discussed in the main body?
The main body covers the development of an econometric rent-sharing model, the justification of exogeneity assumptions, the normalization of firm effects based on productivity (value-added), and the empirical decomposition of the pay premium across various demographics.
Which keywords best characterize this work?
Key terms include Gender Wage Gap, Firm-Specific Pay Premiums, Rent-Sharing, Bargaining Effect, Sorting Effect, Labor Mobility, and Wage Inequality.
Does the study find that firm-specific premiums are a major cause of the wage gap?
Yes, the study concludes that firm-specific premiums and the systematic differences in which firms men and women work at contribute significantly (about 20%) to the overall gender wage gap.
How does the bargaining power of women compare to men according to the findings?
The findings suggest that women's bargaining power is significantly lower, with female employees receiving approximately 90% of the pay premiums earned by their male counterparts in similar firm environments.
- Quote paper
- Sinan Tunbek (Author), 2016, About Card's, Cardoso's and Kline's "Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women", Munich, GRIN Verlag, https://www.grin.com/document/471030
