Discussion paper

DP2603 Gender Wage Differentials in a Competitive Labour Market: The Household Interaction Effect

We present a theoretical explanation of the gender wage gap that turns on the interaction between men and women in households. In equilibria where men are over-represented in full-time work, we show that firms rationally choose to hire women only at strictly lower wages to men. The model developed predicts a gap even controlling for education, occupation and industry of workers and does so in a competitive labour market where there exist no inherent gender differences. We test our theory using CPS data over the period 1979?98 and find it is strongly supported by the data.

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Citation

van Ours, J and P Francois (2000), ‘DP2603 Gender Wage Differentials in a Competitive Labour Market: The Household Interaction Effect‘, CEPR Discussion Paper No. 2603. CEPR Press, Paris & London. https://cepr.org/publications/dp2603