Unpacking the Child Penalty Using Personnel Data: How Promotion Practices Widen the Gender Pay Gap

We estimate the child penalty using detailed personnel records that allow decomposition into distinct pay components. The penalty initially arises from reductions in time-based pay after childbirth. Over time, job-rank-based pay becomes increasingly significant. These effects are interconnected: reduced working hours lead to lower performance evaluations, which subsequently limit promotion opportunities. Our model demonstrates that current promotion practices, which reward extended hours at entry-level positions, can generate production inefficiency. This finding suggests that addressing promotion practices could simultaneously reduce gender inequality and improve talent allocation, making a business case for organizational reform.