Explaining the Decline in the Gender Wage Gap

Men are generally observed to experience steeper wage increases during their work lives than women. Furthermore, men generally supply more hours to the labor market than women. While these observations are no longer as pronounced as they were 50 years ago, they still remain broadly true. This paper puts forth a model in which firms engage in on-the-job-training in general human capital based on payoff expectations that depend on both the expected number of job offers that a worker will receive and on the outcome of a household bargaining problem between the worker in question and his or her spouse. Each couple bargains over how much labor to supply to the market (either by working or by searching for new jobs) and how much to supply to home production. All individuals are identical except that they can be observed to belong to either gender. Households are counterfactually assumed to consist of a man and a woman. Also counterfactually, all workers are assumed to belong to a household. Extensions of the model can allow for same sex unions and/or singles. The basic model can display multiple equilibria some of which are characterized by gender discrimination in on-the-job training by firms