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Sex-Related Wage Differentials and Women's Interrupted Labor Careers--The Chicken or the Egg


  • Reuben Gronau


Sex-related wage differentials are almost universal. Economists traditionally tend to attribute a major fraction of the differential to the difference in on-the-job training. This difference is in turn often explained by the lower profitability of this investment for women who plan to interrupt their careers for family reasons. An alternative explanation that women do not invest because of lack of investment opportunities owing to employers'expectation that they will drop out of the market has been given little attention in the literature. The present paper tries to ascertain, theoretically and empirically, the validity of this argument. Employers have little stake in their employees' investment in general human capital. Thus, if employers' decisions affect investment, this has to be investment in firm-specific human capital. The paper explores the way employers and employees share in such an investment and the way employers' conceptions about women's labor force attachment can affect the size of the investment, women's wages, and their labor-force separation rate. To test the hypothesis that employers' expectations affect women's wages,I examine the effect of plans for labor-force separation on wages. It is assumed that employers are not aware of individual plans, so that absence of a plan's effect on wages can serve as prima facie evidence for the hypothesis. In a simultaneous-equation system it is observed that wages affect plans but plans do not affect wages. Further investigation indicates that the skill intensity of jobs which men and women occupy is a major determinant of the wage gap. This variable is very sensitive to past performance (as measured by labor-force experience and tenure) and future plans in the case of men, but is hardly affected at all by these variables in the case of women.

Suggested Citation

  • Reuben Gronau, 1982. "Sex-Related Wage Differentials and Women's Interrupted Labor Careers--The Chicken or the Egg," NBER Working Papers 1002, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1002
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    References listed on IDEAS

    1. Fuchs, Victor R, 1974. "Recent Trends and Long-Run Prospects for Female Earnings," American Economic Review, American Economic Association, vol. 64(2), pages 236-242, May.
    2. Kenneth Arrow, 1971. "The Theory of Discrimination," Working Papers 403, Princeton University, Department of Economics, Industrial Relations Section..
    3. F. Thomas Juster, 1977. "The Distribution of Economic Well-Being," NBER Books, National Bureau of Economic Research, Inc, number just77-1.
    4. Steven H. Sandell & David Shapiro, 1980. "Work Expectations, Human Capital Accumulation, and the Wages of Young Women," Journal of Human Resources, University of Wisconsin Press, vol. 15(3), pages 335-353.
    5. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    6. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-1260, December.
    7. Joanne Salop & Steven Salop, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 619-627.
    8. Dale T. Mortensen, 1978. "Specific Capital and Labor Turnover," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 572-586, Autumn.
    9. Duncan, Greg J & Hoffman, Saul, 1979. "On-the-Job Training and Earnings Differences by Race and Sex," The Review of Economics and Statistics, MIT Press, vol. 61(4), pages 594-603, November.
    10. Joanne Salop & Steven C. Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
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