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Bargaining and the Gender Wage Gap: A Direct Assessment

Author

Listed:
  • Card, David

    (University of California, Berkeley)

  • Cardoso, Ana Rute

    (IAE Barcelona (CSIC))

  • Kline, Patrick

    (University of California, Berkeley)

Abstract

An influential recent literature argues that women are less likely to initiate bargaining with their employers and are (often) less effective negotiators than men. We use longitudinal wage data from Portugal, matched to balance sheet information on employers, to measure the relative bargaining power of men and women and assess the impact of the gender gap in bargaining strength on the male-female wage gap. We show that a model with additive fixed effects for workers and gender-specific fixed effects for firms provides a close approximation to the wage structure for both men and women. Building on this model we present three complementary approaches to identifying the impact of differential bargaining strength. First, we perform a simple decomposition by assigning the firm-specific wage premiums for one gender to the other. Second, we relate the wage premiums for men and women to measures of employer profitability. Third, we show that changes in firm-specific profitability have a smaller effect on the wage growth of female than male employees. All three approaches suggest that women are paid only 85-90% of the premiums that men earn at more profitable firms. Overall, we estimate that the shortfall in women‘s relative bargaining power explains around 3 percentage points – or 10-15% – of the gender wage gap in Portugal.

Suggested Citation

  • Card, David & Cardoso, Ana Rute & Kline, Patrick, 2013. "Bargaining and the Gender Wage Gap: A Direct Assessment," IZA Discussion Papers 7592, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7592
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    References listed on IDEAS

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    1. Bargaining and the Gender Wage Gap: A Direct Assessment
      by maximorossi in NEP-LTV blog on 2013-10-15 18:24:01

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    Cited by:

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    2. François Rycx & Yves Saks & Ilan Tojerow, 2015. "Does Education Raise Productivity and Wages Equally? The Moderating Roles of Age, Gender and Industry," Working Paper Research 281, National Bank of Belgium.
    3. Johannes Ludsteck, 2014. "The Impact of Segregation and Sorting on the Gender Wage Gap: Evidence from German Linked Longitudinal Employer-Employee Data," ILR Review, Cornell University, ILR School, vol. 67(2), pages 362-394, April.
    4. Azmat, Ghazala & Petrongolo, Barbara, 2014. "Gender and the labor market: What have we learned from field and lab experiments?," Labour Economics, Elsevier, vol. 30(C), pages 32-40.
    5. Cozzi, Guido & Galli, Silvia & Mantovan, Noemi, 2018. "Will a shrink make you richer? Gender differences in the effects of psychotherapy on labour efficiency," European Economic Review, Elsevier, vol. 109(C), pages 257-274.
    6. Nordman, Christophe Jalil & Sarr, Leopold & Sharma, Smriti, 2015. "Cognitive, Non-Cognitive Skills and Gender Wage Gaps: Evidence from Linked Employer-Employee Data in Bangladesh," IZA Discussion Papers 9132, Institute of Labor Economics (IZA).
    7. David J. Deming, 2017. "The Growing Importance of Social Skills in the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1593-1640.
    8. Alexander Ahammer & G. Thomas Horvath & Rudolf Winter-Ebmer, 2017. "The effect of income on mortality—new evidence for the absence of a causal link," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 180(3), pages 793-816, June.
    9. Alexandre Mas, 2017. "Does Transparency Lead to Pay Compression?," Journal of Political Economy, University of Chicago Press, vol. 125(5), pages 1683-1721.
    10. Ilse Lindenlaub & Anja Prummer, 2014. "Gender, Social Networks And Performance," Cambridge Working Papers in Economics 1461, Faculty of Economics, University of Cambridge.
    11. Evangelia Papapetrou & Pinelopi Tsalaporta, 2016. "Inter-industry wage differentials in Greece: rent-sharing and unobserved heterogeneity hypotheses," Working Papers 213, Bank of Greece.
    12. Michèle A. Weynandt, 2014. "Selective Firing and Lemons," NRN working papers 2014-05, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    13. Andréasson, Hannes, 2014. "The effect of decentralized wage bargaining on the structure of wages and firm performance," Ratio Working Papers 241, The Ratio Institute.
    14. Guido Cozzi & Noemi Mantovan & Robert M. Sauer, 2017. "Does it Pay to Work for Free? Negative Selection and the Wage Returns to Volunteer Experience," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(6), pages 1018-1045, December.
    15. Cozzi, Guido & Mantovan, Noemi & Sauer, Robert M., 2013. "Does it Pay to Work for Free? Wage Returns and Gender Differences in the Market for Volunteers," Economics Working Paper Series 1330, University of St. Gallen, School of Economics and Political Science.

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    More about this item

    Keywords

    wage differentials; linked employer-employee data; discrimination; gender;
    All these keywords.

    JEL classification:

    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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