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Gender Wage Gap and FirmsíDynamic Monopsony: Voluntary versus Involuntary Separations

Sanchez, Rafael and Finot, Javier and Villena, Mauricio G. (2019): Gender Wage Gap and FirmsíDynamic Monopsony: Voluntary versus Involuntary Separations.

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Abstract

We exploit a national administrative dataset to estimate labor supply elasticities at the firm level, distinguishing for the first time the source of separation (quits versus layoffs), which is crucial as only the former is consistent with employees responses to changes in wages. Our results suggest that labor supply elasticities increase by around 18% when all separations (i.e., without identifying its source) are used instead of voluntary separations (i.e., quits). Hence, it transpires that previous literature, which due to data constraints, did not identify the source of separations, presented results which were upward biased, thus overestimating labor market competitiveness. We also find that between firm differences in the gender-specific elasticities are more relevant than within firm di¤erences when voluntary separations are used, a result that should be considered by governments in the design of their gender gap policy agenda.

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