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Explaining Gender Wage Differentials: Findings from a Random Effects Model

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Author Info
Ossi Korkeamäki
Tomi Kyyrä

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Abstract

In this paper we evaluate the extent to which the gender wage gap in the Finnish manufacturing sector is attributable to within-job wage differentials, sex differences in individual qualifications, and disproportionate concentration of women in lower-paying firms and lower-paying jobs within firms. We use matched employer-employee data to compare wage differentials between similarly qualified female and male workers who are doing the same job for the same employer. Our modelling approach employs a nested random effects specification to account for the hierarchical grouped structure of the underlying data. White-collar women are found to earn 22% less on average than their male counterparts do. Among blue-collar workers, women?s mean wage is 16% lower than men?s mean wage. The major part of the gender wage gap of white-collar workers results from sex segregation among jobs within firms. By contrast, most of the gap of blue-collar workers is attributable to sex segregation among firms. Unexplained within-job wage differentials account for a quarter of the overall gap of white-collar workers and one-fifth of the overall gap of blue-collar workers.

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Paper provided by Government Institute for Economic Research (VATT) in its series VATT Discussion Papers with number 320.

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Date of creation: 18 Dec 2003
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Handle: RePEc:fer:dpaper:320

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Related research
Keywords: Gender wage gap wage discrimination sex segregation random effects model

Find related papers by JEL classification:
C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - General
L00 - Industrial Organization - - General - - - General
J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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  1. Nabanita Datta Gupta & Donna S. Rothstein, 2005. "The Impact of Worker and Establishment-level Characteristics on Male-Female Wage Differentials: Evidence from Danish Matched Employee-Employer Data," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 19(1), pages 1-34, 03. [Downloadable!] (restricted)
  2. Davis, Peter, 2002. "Estimating multi-way error components models with unbalanced data structures," Journal of Econometrics, Elsevier, vol. 106(1), pages 67-95, January. [Downloadable!] (restricted)
  3. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  4. Kimberly Bayard & Judith Hellerstein & David Neumark & Kenneth Troske, 2003. "New Evidence on Sex Segregation and Sex Differences in Wages from Matched Employee-Employer Data," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 887-922, October. [Downloadable!]
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  5. H. Baltagi, Badi & Heun Song, Seuck & Cheol Jung, Byoung, 2001. "The unbalanced nested error component regression model," Journal of Econometrics, Elsevier, vol. 101(2), pages 357-381, April. [Downloadable!] (restricted)
  6. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January. [Downloadable!] (restricted)
  7. Francine D. Blau & Lawrence M. Kahn, 2000. "Gender Differences in Pay," NBER Working Papers 7732, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Ossi Korkeamäki & Tomi Kyyrä, 2003. "The Gender Wage Gap and Sex Segregation in Finland," VATT Discussion Papers 288, Government Institute for Economic Research (VATT). [Downloadable!]
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  9. Erica L. Groshen, 1987. "The structure of the female/male wage differential: is it who you are, what you do, or where you work?," Working Paper 8708, Federal Reserve Bank of Cleveland. [Downloadable!]
  10. Gubta, Nabanita Datta & Rothstein, Donna S., 2001. "The Impact of Worker and Establishment-level Characteristics on Male-Female Wage Differentials: Evidence from Danish Matched Employee-Employer Data," CLS Working Papers 01-9, Aarhus School of Business, Centre for Labour Market and Social Research. [Downloadable!]
  11. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August. [Downloadable!] (restricted)
  12. Altonji, Joseph G. & Blank, Rebecca M., 1999. "Race and gender in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 48, pages 3143-3259 Elsevier. [Downloadable!] (restricted)
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