Explaining the gender wage gap: Estimates from a dynamic model of job changes and hours changes

Abstract

I address the causes of the gender wage gap with a new dynamic model of wage, hours, and job changes that permits me to decompose the gap into a portion due to gender differences in preferences for hours of work and in constraints. The dy- namic model allows the differences in constraints to reflect possible gender dif- ferences in job arrival rates, job destruction rates, the mean and variance of the wage offer distribution, and the wage cost of part-time work. The model is esti- mated using the 1996 panel of the Survey of Income and Program Participation. I find that the preference for part-time work increases with marriage and num- ber of children among women but not among men. These demographic factors explain a sizable fraction of the gender gap in employment, but they explain no more than 6 percent of the gender wage gap. Differences in constraints, mainly in the form of the mean offered wages and rates of job arrival and destruction, ex- plain most of the gender wage gap. Policy simulation results suggest that, relative to reducing the wage cost of part-time work, providing additional employment protection to part-time jobs is more effective in reducing the gender wage gap.