DP16671 Understanding the role of firms in the gender wage gap over time, over the life cycle, and across worker types

Author(s): Marco Guido Palladino, Alexandra Roulet, Mark Stabile
Publication Date: October 2021
Keyword(s): Bargaining, discrimination, firm pay premium, gender wage gap, sorting
JEL(s): J16, J31, J71
Programme Areas: Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16671

Evidence across many jurisdictions suggests that firm pay premiums contribute meaningfully to the gender wage gap and that this is largely driven by sorting of women into lower paying firms rather than within firm gender differences in pay premiums. We build on this evidence using a cluster-based approach which allows us to relax the usual sample restrictions, to use repeated 2 year panels to examine how the contribution of firms to the gender wage gap has changed over time, to compute age-specific estimates of the gender gap in firm pay premium to document changes over the life cycle, and to explore whether there are complementarities between worker types and firm effects and how these differ by gender. We show that lifting the dual connected set restriction reveals a slightly larger contribution of firms to the gender wage gap, and more strikingly a higher within firm component. Further, the gender gap in firm pay premiums remained fairly constant between 1995 and 2015 (as did the decomposition of this gap) but represents an increasing share of the overall gender wage gap over time. It increases with age, exclusively driven by an increase of the sorting of women into lower paying firms. Finally we find limited evidence of complementarities for both men and women.