Discussion paper

DP17253 The Distribution of the Gender Wage Gap: An Equilibrium Model

We develop an equilibrium model of the labor market to investigate the joint
evolution of gender gaps in labor force participation and wages. We do this
overall and by task-based occupation and skill, which allows us to study distributional
effects. We structurally estimate the model using data from Mexico
over a period during which women's participation increased by fifty percent.
We provide new evidence that male and female labor are closer substitutes in
high-paying analytical task-intensive occupations than in lower-paying manual
and routine task-intensive occupations. We find that demand trends favored
women, especially college-educated women. Consistent with these results, we
see a widening of the gender wage gap at the lower end of the distribution,
alongside a narrowing at the top. On the supply side, we find that increased
appliance availability was the key driver of increases in the participation of unskilled
women, and fertility decline a key driver for skilled women. The growth
of appliances acted to widen the gender wage gap and the decline of fertility to
narrow it. We also trace equilibrium impacts of growth in college attainment,
which was more rapid among women, and of emigration, which was dominated
by unskilled men. Our counterfactual estimates demonstrate that ignoring the
countervailing effects of equilibrium wage adjustments on labor supplies, as is
commonly done in the literature, can be misleading.

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Citation

Bhalotra, S, M Fernández and F Wang (eds) (2022), “DP17253 The Distribution of the Gender Wage Gap: An Equilibrium Model”, CEPR Press Discussion Paper No. 17253. https://cepr.org/publications/dp17253