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Estimating gender wage gap in the presence of efficiency wages -- evidence from European data

Katarzyna Bech () and Joanna Tyrowicz ()
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Katarzyna Bech: Warsaw School Economics

No 20, GRAPE Working Papers from GRAPE Group for Research in Applied Economics

Abstract: Gender wage gap (adjusted for individual characteristics) as a phenomenon means that women are paid unjustifiably less than men, i.e. below their productivity. Meanwhile, efficiency wages as a phenomenon mean that a group of workers is paid in excess of productivity. However, productivity is typically unobservable, hence it is proxied by some observable characteristics. If efficiency wages are effective only in selected occupations and/or industries, and these happen to be dominated by men, measures of adjusted gender wage gaps will confound (possibly) below productivity compensating of women with above productivity efficiency wage prevalence. We propose to utilize endogenous switching models to estimate adjusted gender wage gaps. We find that without correction for the prevalence of efficiency wages, the estimates of the adjusted gender wage gaps tend to be substantially inflated.

Keywords: efficiency wages; gender wage gap; endogenous switching regressions (search for similar items in EconPapers)
JEL-codes: J16 J33 J71 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gen
Date: 2017
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