Unequal Pay or Unequal Employment? A Cross-Country Analysis of Gender Gaps

There is substantial international variation in gender pay gaps, from 25-30% in the US and the UK, to 10-20% in a number of central and northern EU countries, down to an average of 10% in southern EU. We argue that non-random selection of women into work across countries may explain part of such variation. This ides is supported by the observed variation in employment gaps, from 10% in the US, UK and Scandinavian countries, to 15-25% in northern and central EU, up to 30-40% in southern EU and Ireland. If women who are employed tend to have relatively high-wage characteristics, low female employment rates may become consistent with low gender wage gaps simply because low-wage women would not feature in the observed wage distribution. We explore this idea across the US and EU countries estimating gender gaps in potential wages. In order to do this, we recover information on wages for those not in work in a given year by simply making assumptions on the position of the imputed wage observations with respect to the median, not on the actual level. Imputation is based on wage observations from nearest available waves in the sample and/or observable characteristics of the nonemployed. We estimate median wage gaps on the resulting imputed wage distributions. Our estimates for 1999 deliver higher median wage gaps on imputed rather than actual wage distributions for most countries in the sample, meaning that, as one would have expected, women tend on average to be more positively selected into work than men. However, this di¤erence is tiny or virtually zero in the US and northern and central EU countries (except Ireland), and becomes sizeable in Ireland, France and southern EU, all countries in which gender employment gaps are high. In particular, in Spain, Portugal and Greece the median wage gap on the imputed wage distribution reaches 20 log points, a closely comparable level to that of the UK and other central and northern EU countries.