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The Role of the Gender Wage Gap in Overall Wage Inequality: A Quantitative Exercise

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  • Marco A. Badilla Maroto

Abstract

This article presents a novel wage inequality decomposition to analyze the impact of the gender wage gap on overall wage inequality. The decomposition determines the maximum relative wage between genders allowed before it begins to increase total inequality. In addition, I present a structural model of the labor market to evaluate the impact of establishing restrictions on intra-occupational gender pay gaps within each firm. Specifically, I introduce a restriction in which the average wage of one gender cannot exceed α times the average wage of the other gender. For α = 2, the model predicts a 10 percent wage inequality reduction. However, with a tighter restriction of α = 1, the inequality reduction dissipates and reverses into a wage inequality increase.

Suggested Citation

  • Marco A. Badilla Maroto, 2021. "The Role of the Gender Wage Gap in Overall Wage Inequality: A Quantitative Exercise," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2020), pages 169-207, July.
    • Handle: RePEc:col:000425:019768
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    Keywords

    Gender; inequality; restriction; occupation;
    All these keywords.

    JEL classification:

    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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