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Estimation of the Effects of Statistical Discrimination on the Gender Wage Gap

Atsuko Tanaka
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Atsuko Tanaka: University of Calgary

No 2015-22, Working Papers from Department of Economics, University of Calgary

Abstract: How much of the gender wage gap can be attributed to statistical discrimination? Applying an employer learning model and Instrumental Variable (IV) estimation strategy to Japanese panel data, I examine how women's generally weak labor force attachment affects wages when employers cannot easily observe an individual's labor force intentions. To overcome endogeneity issues, I use survey information on individual workers' intentions to continue working after having children and Japanese panel data with exogenous variation in average quit rates for female workers. I find that the extent of statistical discrimination is greatest for young age cohorts, ages 24 to 35, and that it diminishes for older cohorts. I also find that if employers could observe an individual's labor force intentions, the gender wage gap could be reduced from 17% to 5% for workers aged 24 to 29.

Date: 2015-12-21
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