Does rent sharing profit female and male workers? Evidence from Israeli matched employer-employee data

This paper analyses the impact of workplace characteristics on individual wages based on a unique cross-section matched employer–employee data set for the Israeli private manufacturing sector in 1995. Specifically, we examine the effects of the interaction between profit-sharing and wages on the gender wage gap. The empirical findings show that individual compensation is significantly and positively correlated with firms’ profits-per-employee, even when controlling for all of the following: group effects in the residuals, individual and firms’ characteristics, industry wage differentials and endogeneity of profits. Wage–profit elasticity is found to be 11 per cent and it does not significantly differ between genders. With respect to the overall gender wage gap (on average women earn 28 per cent less than men), the results show that within firms there is no gender discrimination and that 12 per cent of this gap can be explained by the wage–profits profile and by the fact that women are more likely to be employed in less profitable firms than men.