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Distributional and Behavioral Effects of the Gender Wage Gap

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  • Patricia Gallego-Granados
  • Johannes Geyer

Abstract

The gender wage gap is a persistent labor market phenomenon. Most research focuses on the determinants of these wage differences. We contribute to this literature by exploring a different research question: if wages of women are systematically lower than male wages, what are the distributional consequences (disposable income) and what are the labor market effects (labor supply) of the wage gap? We demonstrate how the gender gap in gross hourly wages shows up in the distribution of disposable income of households. This requires taking into account the distribution of working hours as well as the tax-benefit system and other sources of household income. We present a methodological framework for deriving the gender wage gap in terms of disposable income which combines quantile decomposition, simulation techniques and structural labor supply estimation. This allows us to examine the implications of the gender wage gap for income inequality and working incentives. We illustrate our approach with an application to German data.

Suggested Citation

  • Patricia Gallego-Granados & Johannes Geyer, 2015. "Distributional and Behavioral Effects of the Gender Wage Gap," Discussion Papers of DIW Berlin 1469, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1469
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    More about this item

    Keywords

    gender wage gap; quantile regression; wage decomposition; labor supply; microsimulation; income distribution; tax-benefit system;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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