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The Bound Estimate of the Gender Wage Convergence under Employment Compositional Change

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  • KAWAGUCHI Daiji
  • NAITO Hisahiro

Abstract

The gender wage gap among full-time workers has narrowed in the last 15 years in Japan. The demographic characteristics of full-time employees also has changed during the same period. The changed composition of workers could result in an observed gender wage convergence without any change in the underlying structure of the equilibrium o.ered wages. This paper develops a new method for estimating the convergence of the gender wage gap when the composition of workers of both genders changes. The newly developed estimators trim the wage distribution of certain groups characterized by observed characteristics so that the composition of workers in terms of these characteristics is stable over time. Applying two extreme trimming rules, based on two extreme distributional assumptions of unobserved characteristics, the trimming estimators identify the upper-and lower-bounds of the true gender wage convergence. The regression-adjusted gender wage gap for full-time workers has narrowed by 6 percentage points, changing from 33 percent in 1987 to 27 percent in 2002. However, the lower-bound estimate indicates an 18-percentage-point divergence and the upper-bound estimate indicates a 33-percentage-point convergence. However, once we assume that spousal income determines reservation wage, but not o.ered wage, we can signi.cantly tighten the bounds. The results highlight that the prediction from economic theory, combined with a reasonable excluded variable assumption, is crucial to making inferences about gender wage convergence in Japan. The method developed in this paper is applicable to other cases for examining the temporal variation of the average wage when the employment composition changes.

Suggested Citation

  • KAWAGUCHI Daiji & NAITO Hisahiro, 2006. "The Bound Estimate of the Gender Wage Convergence under Employment Compositional Change," ESRI Discussion paper series 161, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esj:esridp:161
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    File URL: http://www.esri.go.jp/jp/archive/e_dis/e_dis170/e_dis161.pdf
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    References listed on IDEAS

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    3. Richard Blundell & Amanda Gosling & Hidehiko Ichimura & Costas Meghir, 2007. "Changes in the Distribution of Male and Female Wages Accounting for Employment Composition Using Bounds," Econometrica, Econometric Society, vol. 75(2), pages 323-363, March.
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    5. Casey B. Mulligan & Yona Rubinstein, 2004. "The Closing of the Gender Gap as a Roy Model Illusion," NBER Working Papers 10892, National Bureau of Economic Research, Inc.
    6. Fumio OHTAKE, 2008. "Inequality in Japan," Asian Economic Policy Review, Japan Center for Economic Research, vol. 3(1), pages 87-109, June.
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    Cited by:

    1. Daiji Kawaguchi & Junko Miyazaki, 2009. "Working mothers and sons’ preferences regarding female labor supply: direct evidence from stated preferences," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(1), pages 115-130, January.
    2. Ryo Kambayashi & Daiji Kawaguchi & Izumi Yokoyama, 2008. "Wage distribution in Japan, 1989-2003," Canadian Journal of Economics, Canadian Economics Association, vol. 41(4), pages 1329-1350, November.
    3. Abe, Yukiko, 2010. "Equal Employment Opportunity Law and the gender wage gap in Japan: A cohort analysis," Journal of Asian Economics, Elsevier, vol. 21(2), pages 142-155, April.
    4. Abe, Yukiko, 2012. "A cohort analysis of male labor supply in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 23-43.
    5. Abe, Yukiko, 2011. "Regional variations in labor force behavior of women in Japan," CEI Working Paper Series 2010-12, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    6. Abe, Yukiko, 2011. "The Equal Employment Opportunity Law and labor force behavior of women in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 25(1), pages 39-55, March.

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