The gender wage gap – due to differences in efficiency wage effects or discrimination?
Women often receive lower wages than men for comparable work. Many explanations are offered for this fact, ranging from women’s lower negotiation skills to discrimination by employers. In this paper, an experiment, which was originally conceptualized to test efficiency-wage theory, has been applied to test whether women get paid less than men in an experimental market, and if this is the case, why. The experiment is a variant of Fehr & Falk’s (1999) double auction with effort. Results are striking: Female workers receive significantly lower wages than male workers, no matter whether men or women are in the role of the firm. However, this does not pay for the firms, as women’s reactions to low wages are equal to those of men: low effort. More specifically, a high discrepancy between the wage asked by a worker and the wage offered by the firm leads to low effort. Extrapolating from the experiment to the “real” labor market, the results are pointing towards a vicious cycle: Women are offered lower wages than they expect, and consequentially they exhibit low effort levels. Therefore, employers who do not realize that women – just like men – reciprocate might regard their productivity as lower.
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