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The Effect of Unfair Chances and Gender Discrimination on Labor Supply

Author

Listed:
  • Gagnon, Nickolas

    (RS: GSBE other - not theme-related research, Microeconomics & Public Economics)

  • Bosmans, Kristof

    (RS: GSBE Theme Human Decisions and Policy Design, Microeconomics & Public Economics)

  • Riedl, Arno

    (RS: GSBE Theme Human Decisions and Policy Design, Microeconomics & Public Economics)

Abstract

Labor market opportunities and wages may be unfair for various reasons, and how workers respond to different types of unfairness can have major economic consequences. Using an online labor platform, where workers engage in an individual task for a piece-rate wage, we investigate the causal effect of neutral and gender-discriminatory unfair chances on labor supply. We randomize workers into treatments where we control relative pay and chances to receive a low or a high wage. Chances can be fair, unfair based on an unspecified source, or unfair based on gender discrimination. Unequal pay reduces labor supply of low-wage workers, irrespective of whether the low wage is the result of fair or unfair chances. Importantly, the source of unfair chances matters. When a low wage is the result of gender-discriminatory chances, workers matched with a high-wage worker substantially reduce their labor supply compared to the case of equal low wages (−22%). This decrease is twice as large as those induced by low wages due to fair chances or unfair chances coming from an unspecified source. In addition, exploratory analysis suggests that in response to unequal pay, low-wage male workers reduce labor supply irrespective of the source of inequality, whereas low-wage female workers reduce labor supply only if unequal pay is due to gender-discriminatory chances. Our results concerning gender discrimination indicate a new reason for the lower labor supply of women, which is a prominent explanation for the gender gap in earnings.

Suggested Citation

  • Gagnon, Nickolas & Bosmans, Kristof & Riedl, Arno, 2020. "The Effect of Unfair Chances and Gender Discrimination on Labor Supply," Research Memorandum 005, Maastricht University, Graduate School of Business and Economics (GSBE).
  • Handle: RePEc:unm:umagsb:2020005
    DOI: 10.26481/umagsb.2020005
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    3. Zahra Murad & Robert Dowell, 2020. "Foreign visa salary requirement and natives’ reservation wages," Working Papers in Economics & Finance 2020-06, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.

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    More about this item

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • 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
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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