Job market paper:
Wage and Employment Discrimination by Gender in Labor Market Equilibrium [Job market paper]
Abstract: The gender wage gap widens substantially over the lifecycle, especially between highly educated men and women. This paper develops an equilibrium search model to study the interactions of three potential explanations for the widening gender gap: human capital accumulation, preference for job amenities, and employers' statistical discrimination in wages and hiring. In the model, men and women differ in quit probabilities, parental leave lengths, and preferences for amenities before and after having children. A novel feature of my model is that employers make decisions on both the “intensive” wage margin and the “extensive” hiring margin as they take into account the above gender differences. Estimating the model on administrative employer-employee data combined with occupational level survey data on amenities from Finland, I find that 44% of the gender wage gap in early career is attributed to employers’ statistical discrimination based on fertility concerns, whereas gender differences in labor market attachment explain 70% of the gap in late career. Both hiring discrimination and preference for amenities draw women to low-productivity jobs early in the lifecycle, and slow down women's career progression in the long run. Counterfactual simulations show that shifting two parental leave months from women to men shrinks the wage gap by 13%. A gender quota at top jobs improves women’s representation in high-productivity positions, but firms undo this policy by exerting more wage discrimination. An equal pay policy counterfactual shows that requiring firms to pay men and women the same wage closes the wage gap by 15% on average, but has unintended consequences as employers adjust on the hiring margin.
Abstract: Job-protected and paid family leave may have unintended consequences when we consider firms' equilibrium responses. In the presence of labor market frictions, employers might incur adjustment costs upon workers' absence and turnover. We quantify the costs faced by firms that employ workers of varying durations of family leave. Exploiting exogenous variation from a 3-month parental leave expansion in Sweden, we find that women worked 2.5 months less after childbirth whereas men worked only 1 week less. Moreover, the reform increased the probability that women separate from their pre-birth employers. Women with fewer substitutes within the workplace took up less leave and shifted take-up to their spouses, suggesting that workers internalize their employer's adjustment costs. Firms with greater exposure to the reform responded to the labor shortage by hiring temporary workers and increasing incumbents' hours. The total wage cost of these adjustments was over and above the salary for the person on leave, suggesting that such reorganization is costly. We document substantial heterogeneity in firms' strategies by the ease with which replacement workers could be found, indicating several sources of frictions associated with worker absence and exits. Finally, focusing on all active firms in the economy, we find suggestive evidence that firms with a higher predicted reform exposure reduced their relative hiring of women of childbearing ages, and those hired were less likely to be promoted than their male and older counterparts. In the aggregate, the employment composition shifted towards male and older women in industries with a higher predicted reform exposure.
Abstract: The gender wage gap expands over the life-cycle. We develop an equilibrium search model to quantify the extent to which gender differences in labor market behavior contribute to the gap in a setting where firms can statistically discriminate by gender. We allow men and women to differ in their turnover rates, human capital accumulation rates, parental leave lengths and leave coverages. Firms take into account these gender differences and choose piece-rates for men and women to maximize expected profits. We estimate the model on the first 15 years of workers’ careers in the NLSY79 data, and find that 45% of the gap is due to differential wage rates offered to men and women in equally productive firms, 27% of the gap is due to gender differences in accumulated human capital, and 28% is due to differences in the productivities of firms employing men and women. On the other hand, the expansion of the gap over the life-cycle is mostly driven by the divergence of human capital levels. Counterfactual policy exercises highlight the role of firms in determining gender-specific piece rates, especially in early career. A policy eliminating gender differences in separation rates is the most effective, as it reduces the wage gap by 57%. Eliminating job segregation and equalizing parental leave generosity reduces the gap by 27% and 9.5% respectively. These results suggest that policies promoting stable employment of women during child-rearing years would be more effective than those aimed at parental leave alone.