DP16383 The Gender Pay Gap: Micro Sources and Macro Consequences

Author(s): Iacopo Morchio, Christian Moser
Publication Date: July 2021
Keyword(s): compensating differentials, discrimination, Empirical Equilibrium Search Model, Linked employer-employee data, Misallocation, Worker and Firm Heterogeneity
JEL(s): E24, E25, J16, J31
Programme Areas: Labour Economics, Public Economics, Development Economics, Macroeconomics and Growth, Organizational Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16383

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.