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Selection, Investment, and Women's Relative Wages Since 1975

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  • Casey B. Mulligan
  • Yona Rubinstein

Abstract

In theory, growing wage inequality within gender should cause women to invest more in their market productivity and should differentially pull able women into the workforce, thereby closing the measured gender gap even though women's wages might have grown less than men's had their behavior been held constant. Using the CPS repeated cross-sections between 1975 and 2001, we use control function (Heckit) methods to correct married women's conditional mean wages for selectivity and investment biases. Our estimates suggest that selection of women into the labor market has changed sign, from negative to positive, or at least that positive selectivity bias has come to overwhelm investment bias. The estimates also explain why measured women's relative wage growth coincided with growth of wage inequality within-gender, and attribute the measured gender wage gap closure to changing selectivity and investment biases, rather than relative increases in women's earning potential. Using PSID waves 1975-93 to control for the changing female workforce with person-fixed effects, we also find little growth in women's mean log wages. Finally, we make a first attempt to gauge the relative importance of selection versus investment biases, by examining the family and cognitive backgrounds of members of the female workforce. PSID, NLS, and NLSY data sets show how the cross-section correlation between female employment and family/cognitive background has changed from "negative" to "positive" over the last thirty years, in amounts that might be large enough to attribute most of women's relative wage growth to changing selectivity bias.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11159.

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Date of creation: Feb 2005
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Handle: RePEc:nbr:nberwo:11159

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Cited by:
  1. Bruno Falcão & Rodrigo Soares, 2006. "The Demographic Transition and the Sexual Division of Labor," 2006 Meeting Papers 49, Society for Economic Dynamics.
  2. Thorsten Beck & Ross Levine & Alexey Levkov, 2007. "Big Bad Banks? The Impact of U.S. Branch Deregulation on Income Distribution," NBER Working Papers 13299, National Bureau of Economic Research, Inc.
  3. Chiappori, Pierre-André & Iyigun, Murat & Weiss, Yoram, 2006. "Investment in Schooling and the Marriage Market," IZA Discussion Papers 2454, Institute for the Study of Labor (IZA).
  4. Philip Sauré & Hosny Zoabi, 2009. "Effects of Trade on Female Labor Force Participation," Working Papers 2009-12, Swiss National Bank.
  5. Akee, Randall K. Q. & Yuksel, Mutlu, 2010. "Skin Tone's Decreasing Importance on Employment: Evidence from a Longitudinal Dataset, 1985-2000," IZA Discussion Papers 5120, Institute for the Study of Labor (IZA).
  6. Dragana Djurdjevic & Sergiy Radyakin, 2007. "Decomposition of the Gender Wage Gap Using Matching: An Application for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 143(IV), pages 365-396, December.
  7. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U. S. Wage Inequality: Re-Assessing the Revisionists," Harvard Institute of Economic Research Working Papers 2095, Harvard - Institute of Economic Research.
  8. Donghoon Lee & Kenneth I. Wolpin, 2006. "Accounting for Wage and Employment Changes in the U.S. from 1968-2000: A Dynamic Model of Labor Market Equilibrium," 2006 Meeting Papers 172, Society for Economic Dynamics.
  9. John J. Donohue III, 2005. "The Law and Economics of Antidiscrimination Law," NBER Working Papers 11631, National Bureau of Economic Research, Inc.

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