Monday, August 17, 2009

Gender pay gap: nonpecuniary benefits edition

Another reason why differences in average wage rates by gender are not evidence of discrimination:
This study is the first to estimate mothers’ marginal willingness to pay (MWP) for job amenities directly. Its identification strategy relies on German maternity leave length. The key aspect of the maternal leave framework is that mothers can decide whether and when to return to their guaranteed job. Thus, in contrast to previous studies that analyze the job search of employed workers, this framework allows us to overcome the limitation of not observing the wage/amenity offer process. A theoretical model of the leave length decision is derived from a random utility approach. Using data from the German Socio-Economic Panel and the Qualification and Career Survey, this model is estimated by a discrete duration method. The MWP for amenities can be inferred through the estimated elasticities of the leave length with respect to the amenities and the wage. The results provide evidence that mothers are willing to sacrifice a significant fraction of their wage to reduce hazards (22%) and to enjoy a flexible working schedule (36-56%).
From Andrea Christina Felfe's new SSRN paper, "The Willingness to Pay for Job Amenities: Evidence from Mothers' Return to Work". If measured wage differences include only salary and not non-pecuniary benefits, and if men and women have different average valuations of non-pecuniary benefits like flexible work schedules, then this can drive observed wage differentials directly. Of course, most regression analysis I've seen shows the wage gap disappears anyway when controlling for education, work experience, and time outside the work force.

HT: Wayne Marr at SSRN's Twitter Feed.

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