Gender Wage Gap and Firm Market Power: Evidence from Chile

Sanchez, Rafael and Finot, Javier and Villena, Mauricio G. (2019): Gender Wage Gap and Firm Market Power: Evidence from Chile.

Abstract

The main aim of this work is to explain the Chilean gender wage gap using a dynamic monopsony model to estimate the labor supply elasticities at the firm level. Our results suggest that the elasticities of labor supply to firms are small, which implies that firms have labor market power. We also found that depending on the especification, Chilean men would earn approximately 19% - 28% more than women as a result of the di¤erence in labor supply elasticities by gender, ceteris paribus. Furthermore, we find that in the long run, the magnitude of between-firm di¤erences in elasticities are higher than within-firm di¤erences, which suggests that the gender wage gap is driven by structural factors that generate gender sorting to firms. Finally, using the same methodology, we find that the elasticities for a high-income countries (e.g. the United States) are higher than those obtained for a middle-income country (e.g. Chile) for both men and women, which suggests higher labor market frictions in middle-income countries. The main difference between USA and Chile comes from the low labor supply elasticity of Chilean women, which appears to be explained from their low recruitment elasticity from nonemploeyment.

• Item Type: MPRA Paper
• Language: English
• Keywords: Gender Pay Gap, Dynamic Monopsony, Elasticity of Labor Supply, Worker Mobility, Chile
• Subjects: J - Labor and Demographic Economics > J1 - Demographic Economics > J16 - Economics of Gender ; Non-labor Discrimination; J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J42 - Monopsony ; Segmented Labor Markets; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J62 - Job, Occupational, and Intergenerational Mobility; J - Labor and Demographic Economics > J7 - Labor Discrimination > J71 - Discrimination

References

Acosta, E., M. Perticará y C. Ramos (2007).Oferta Laboral Femenina y Cuidado Infantil, Desafíos al desarrollo de Chile: elementos para el diálogo de políticas, Washington, D.C., Banco Interamericano de Desarrollo.

Albanesi, Stefania and Claudia Olivetti (2009) "Home Production, Market Production and the Gender Wage Gap: Incentives and Expectations". Review of Economic Dynamics 12(1): 80-107.

Altonji, Joseph and Rebecca Blanck (1999) "Race and Gender in the Labor Market" in Handbook of Labor Economics, Vol. 3, edited by Orley C. Ashenfelter and David Card, pp.3143-3259. Amsterdam, Elsevier.

Armendáriz, B., & Larraín, F. (2017). The Economics of Contemporary Latin America. MIT Press. Becker, Gary (1971) The Economics of Discrimination. Chicago: University of Chicago Press.

Benson, Alan (2014) "Rethinking the two body problem: The segregation of Women into Geographically Dispersed Occupations". Demography 51(5):1619-1639.

Bertrand, Marianne (2011) "New Perspectives on Gender" in Handbook of Labor Economics, Vol. 4, edited by Orley C. Ashenfelter and David Card, pp.1543-1590. Amsterdam, Elsevier.

Blau, Francine and Lawrence Kahn (2017) "The Gender wage gap: Extent, Trends and Explanations". Journal of Economic Literature Vol. LV, N3

Borghans, Lex; Bas ter Weel and Bruce Weinberg (2014) "People Skills and the labor market outcomes of Underrepresented Groups". ILR Review 67(2): 287-334.

Bravo, D., C. Sanhueza and S. Urzúa (2008), �Ability, schooling choices and gender labor market discrimi- nation: evidence for Chile�, Research Network Working Paper, No R-558, Washington, D.C., Banco Inter- americano de Desarrollo.

Bueno, Ivonne and Marcela C. Perticara (2009) �A new approach to gender wage gaps in Chile.� (2009). Cepal Review 99(December): 131-147.

Card, David; Ana Raute Cardoso and Patrick Kline (2016) "Bargaining, Sorting and the Gender Wage Gap: Quantifying the impact of �rms on the relative Pay of Women. Quarterly Journal of Economics, 131(2): 633-686."

Cattan, Sarah (2014) "Psychological Traits and the Gender Wage Gap". Unpublished.

Chioda L. (2011) "Work and family: Latin America and the Caribbean women in search of a new balance". Technical report, Latin America and the Caribbean Gender Unit, World Bank, Washington, DC. http://siteresources.worldbank.org/LACEXT/Resources/informe_genero_LACDEF.pdf.

Contreras, D. (2003). Poverty and inequality in a rapid growth economy: Chile 1990�1996. Journal of Development Studies, 39(3), 181-200.

Contreras, D., L. de Mello & E. Puentes (2011) The determinants of labour force participation and employ- ment in Chile. Applied Economics, 43:21, 2765-2776, DOI: 10.1080/00036840903373303.

Cooke, Thomas; Paul Boyle, Kenneth Couch and Peteke Feijten (2009) "A Longitudinal Analysis of Family Migration and the Gender Gap in Earnings in the United States and Great Britain". Demography 46(1): 147-167.

Croson, Rachel and Uri Gneezy (2009) "Gender Di¤erences in Preferences". Journal of Economic Literature 47(2):448-474.

Cruz, G. and T. Rau (2017) "The E¤ects of Firms�Pay Policies and Equal Pay Laws on the Gender Wage Gap in Chile". Working Paper.

European Commission (2013), The gender gaps in pensions in the EU. Available at: http://ec.europa.eu/justice/gender-equality/�les/documents/130530_pensions_en.pdf

Gill, I. and C. Montenegro (2002). �Responding to earning di¤erentials in Chile�, Crafting Labor Policy: Techniques and Lessons from Latin America, I. Gill, C. Montenegro and D. Dormeland (comps.),Washington, D.C., World Bank.

Hirsch, Boris; Thorsten Schank and Claus Schnabel (2010) "Di¤erences in Labor Supply to Monopsonis- tics firms and the Gender Pay Gap: An Empirical Analysis Using linked Employer-Employee Data from Germany" Journal of Labor Economics 28(2) 291-330. United Nations Development Programme (UNDP) (2019). "Human Development Reports" http://www.hdr.undp.org/

Jackson, E. and M. Jabbie (2019) "Understanding market failure in the developing country context". MPRA Paper No. 94577.

Mammen, K., and C. Paxson (2000). �Women�s work and economic development.�The Journal of Economic Perspectives 14(4): 141�164.

Manning, Alan (2003) Monopsony in Motion: Imperfect Competition in Labor Markets. Princeton NJ: Prince- ton University Press.

Montero, R. and T. Rau (2015) "Part-time Work, Job Satisfaction and Well-being: Evidence from a Devel- oping OECD Country", The Journal of Development Studies, 51:4, 370-385

Montenegro, C. (2001), �Wage distribution in Chile: does gender matter? A quantile regression approach�, Working Paper Series, No 20, Washington, D.C., World Bank.

Mueller, Gerrit and Erick Plug (2006) "Estimating the e¤ect of personality on Male and Female Earnings" ILR Review, 60(1): 3-22.

Ñopo, H. (2007), �The gender wage gap in Chile 1992-2003 from a matching comparisons perspective�, IZA Discussion Papers, No 2698, Bonn, Institute for the Study of Labor.

OECD (2018), Education at a Glance 2018: OECD Indicators, OECD Publishing, Paris. http://dx.doi.org/10.1787/eag-2018-en

Paredes, R. (1982), �Diferencias de ingreso entre hombres y mujeres en el Gran Santiago, 1969 y 1981�, Estudios de Economía, Santiago de Chile, Universidad de Chile.

Paredes, R. y L. Riveros (1994), �Gender wage gaps in Chile. A longterm review: 1958-1990�, Estudios de Economía, Santiago de Chile, Universidad de Chile.

Perticará, M. and A. Astudillo (2008). ¿Qué tan alta puede ser la brecha de salarios en Chile? Investigando diferencias salariales entre hombres y mujeres a partir de regresiones de cuantiles, Working Papers Economic Series, No I-211, Santiago de Chile, ILADESGeorgetown University/Universidad Alberto Hurtado.

Perticará, M., & Bueno, I. (2009). A new approach to gender wage gaps in Chile. CEPAL Review, (99).

Ransom, Michael and Ronald Oaxaca (2010) "New Market Power Models and Sex Di¤erences in Pay". Journal of Labor Economics 28(2): 267-289 Robinson, Joan (1933) The Economics of Imperfect Competition. London: Macmillan.

Sánchez, Rafael, Javier Finot, and Mauricio Villena (2019). "Gender Wage Gap and Firms�Dynamic Monopsony: Voluntary versus Involuntary Separations", mimeo.

Vick, Brandon (2017) "Measuring links between labor monopsony and the gender pay gap in Brazil". IZA Journal of Development and Migration 7:10.

Weber, J. E. R. (2017). The Political Economy of Income Inequality in Chile Since 1850. In Has Latin American Inequality Changed Direction? (pp. 43-64). Springer, Cham.

Webber, Douglas (2015) "Firm market power and the earnings distribution." Labour Economics 35: 123-134.

Webber, Douglas A. (2016) "Firm-level monopsony and the gender pay gap". Industrial Relations: A Journal of Economy and Society, 55(2), 323-345.

World Bank. (2012) World development report: gender equality and development. Washington, DC: World Bank.