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What Drives the Gender Wage Gap? Examining the Roles of Sorting, Productivity Differences, Bargaining, and Discrimination

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  • Isabelle Sin
  • Steven Stillman
  • Richard Fabling

Abstract

As in other OECD countries, women in New Zealand earn substantially less than men with similar observable characteristics. In this paper, we use fifteen years of linked employer-employee data to examine different explanations for this gender wage gap. We find an overall gender wage gap between 20% and 28%, of which gender differences in sorting across occupations explain 9%, across industries 16% to 19%, and across firms 5% to 9%, respectively. The remaining within-firm gender wage gap is still between 13% and 17%. Around 5 percentage points of this are explained by women being less willing to bargain or less successful at bargaining to capture firm-specific rents. Gender differences in productivity also explain at most 4.5 percentage points of this remaining gap. These results suggest that taste discrimination is also important for explaining why women are paid less than their relative contribution to firm output. Across-industry and over-time variation in the gender wage-productivity gap further support this conclusion.

Suggested Citation

  • Isabelle Sin & Steven Stillman & Richard Fabling, 2022. "What Drives the Gender Wage Gap? Examining the Roles of Sorting, Productivity Differences, Bargaining, and Discrimination," The Review of Economics and Statistics, MIT Press, vol. 104(4), pages 636-651, October.
    • Handle: RePEc:tpr:restat:v:104:y:2022:i:4:p:636-651
    DOI: 10.1162/rest_a_01000
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    Cited by:

    1. Camacho, Carmen & Hassan, Waleed, 2023. "The dynamics of revolution: Discrimination, social unrest and the optimal timing of revolution," Economic Modelling, Elsevier, vol. 128(C).
    2. Jaan Masso & Jaanika Meriküll & Liis Roosaar & Kärt Rõigas & Tiiu Paas, 2024. "What Determines The Gender Pay Gap In Academia?," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 147, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    3. Niels Johannesen & Simon Muchardt, 2024. "Is the Bar Higher for Female Scholars? Evidence from Career Steps in Economics," CESifo Working Paper Series 11101, CESifo.
    4. Abrahams, Scott, 2024. "An analysis of the gender layoff gap implied by a gender gap in wage bargaining," Economics Letters, Elsevier, vol. 234(C).
    5. Görg, Holger & Jäkel, Ina C., 2024. "Beyond Borders: Do Gender Norms and Institutions Affect Female Businesses?," IZA Discussion Papers 17123, Institute of Labor Economics (IZA).
    6. McGee, Andrew & McGee, Peter, 2023. "Gender Differences in Reservation Wages in Search Experiments," Working Papers 2023-11, University of Alberta, Department of Economics.
    7. Boza, István & Reizer, Balázs, 2024. "The Role of Flexible Wage Components in Gender Wage Difference," IZA Discussion Papers 17125, Institute of Labor Economics (IZA).
    8. Pham, Tho & Schaefer, Daniel & Singleton, Carl, 2024. "Unequal Hiring Wages and Their Impact on the Gender Pay Gap," IZA Discussion Papers 17285, Institute of Labor Economics (IZA).
    9. Dave Maré, 2022. "Pay gaps – an $18 billion a year issue," Working Papers 22_45, Motu Economic and Public Policy Research.
    10. Görg, Holger & Jäkel, Ina Charlotte, 2024. "Beyond borders: Do gender norms and institutions affect female businesses?," Kiel Working Papers 2273, Kiel Institute for the World Economy (IfW Kiel).

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