Discussion Paper Details

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Title: The Gender Pay Gap: Micro Sources and Macro Consequences

Author(s): Iacopo Morchio and Christian Moser

Publication Date: July 2021

Keyword(s): compensating differentials, discrimination, Empirical Equilibrium Search Model, Linked employer-employee data, Misallocation and Worker and Firm Heterogeneity

Programme Area(s): Development Economics, Labour Economics, Macroeconomics and Growth, Organizational Economics and Public Economics

Abstract: We document that a large share of the gender pay gap in Brazil is due to women working at lower-paying employers. However, compared with that of men, women's revealed-preference ranking of employers is less increasing in pay. To interpret these facts, we develop an empirical equilibrium search model with endogenous gender differences in pay, amenities, and recruiting intensities across employers. The estimated model suggests that compensating differentials explain one-fifth of the gender pay gap, that there are significant output and welfare gains from eliminating gender differences, and that equal-treatment policies fail to close the gender pay gap.

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Bibliographic Reference

Morchio, I and Moser, C. 2021. 'The Gender Pay Gap: Micro Sources and Macro Consequences'. London, Centre for Economic Policy Research.