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The role of firms in the gender wage gap

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  • Masso, Jaan
  • Meriküll, Jaanika
  • Vahter, Priit

Abstract

Recent research suggests that firm-level factors play a significant role in the gender wage gap. This paper analyses the role of sorting between and bargaining within firms for gender wage gap using the methodology of Card, Cardoso and Kline (2016) and employing linked employer-employee data from Estonia, a country with the highest gender wage gap in EU. We find that firm-level factors explain 40% of the gender wage gap and that the within-firm bargaining plays important role. This latter effect can reflect institutions like low minimum wages and union power. The role of firm-level factors has increased over time and is especially important at the top of the wage distribution and amongst workers that are more skilled. We also find, in contrast to some recent evidence from other countries, that parenthood is not activating the effects of firm-level wage premiums on the gender wage gap. This is likely related to work-family institutions in our sample country, such as job protection of mothers after childbirth and generous availability of formal childcare. The results point to the importance of institutions in the manifestation of firm level factors in the gender wage gap.

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  • Masso, Jaan & Meriküll, Jaanika & Vahter, Priit, 2022. "The role of firms in the gender wage gap," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 454-473.
    • Handle: RePEc:eee:jcecon:v:50:y:2022:i:2:p:454-473
    DOI: 10.1016/j.jce.2021.10.001
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    Cited by:

    1. Li, Jiang & Dostie, Benoit & Simard-Duplain, Gaëlle, 2020. "What Is the Role of Firm-Specific Pay Policies on the Gender Earnings Gap in Canada?," IZA Discussion Papers 13907, Institute of Labor Economics (IZA).
    2. Ilona Pavlenkova & Luca Alfieri & Jaan Masso, 2021. "Effects Of Automation On The Gender Pay Gap: The Case Of Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 131, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    3. Xinxin Ma, 2022. "Internet use and gender wage gap: evidence from China," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 56(1), pages 1-17, December.
    4. Jaan Masso & Priit Vahter, 2020. "Innovation As A Firm-Level Factor Of The Gender Wage Gap," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 128, Faculty of Economics and Business Administration, University of Tartu (Estonia).

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    More about this item

    Keywords

    Gender wage gap; Firm-level productivity premiums; Sorting and bargaining; Distribution of wages; Skills; Motherhood penalty;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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