DP14237 Do Firms Respond to Gender Pay Gap Transparency?

Author(s): Morten Bennedsen, Elena Simintzi, Margarita Tsoutsoura, Daniel Wolfenzon
Publication Date: December 2019
Date Revised: April 2020
Keyword(s): Difference-in-Discontinuities, Gender pay gap, transparency
JEL(s):
Programme Areas: Labour Economics, Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14237

We examine the effect of pay transparency on gender pay gap and firm outcomes. This paper exploits a 2006 legislation change in Denmark that requires firms to provide gender disaggregated wage statistics. Using detailed employee-employer administrative data and a difference-in-differences and difference-in-discontinuities designs, we find the law reduces the gender pay gap, primarily by slowing the wage growth for male employees. The gender pay gap declines by approximately two percentage points, or a 13% reduction relative to the pre-legislation mean. Despite the reduction of the overall wage bill, the wage-transparency mandate does not affect firm profitability, likely because of the offsetting effect of reduced firm productivity.