An Equilibrium Analysis of the Gender Wage Gap

Arbeitspapier

This paper develops a theory of the gender wage gap. In a general equilibrium model, spouses devide their labor between a formal sector and a home sector. Due to indivisibility effects, productivity of labor in the formal sector is negatively related to labor used in the home; at the same time labor inputs are complementary in home production. We show that initial beliefs about the gender wage gap are self-fulfilling, and a central result is multiplicity of equilibria. Spouses allocate their labor equally, if they expect to earn the same wage rates, which ex post reinforces equal wage rates; whereas they allocate their labor differently, if they expect to earn different wage rates. The latter situation manifests itself in a gender wage gap. By use of numerical examples, we show that welfare is highest when spouses allocate labor equally. We relate this finding to policy recommendations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: EPRU Working Paper Series ; No. 2006-08

Classification and Topics

• Classification: Wirtschaft ; Household Production and Intrahousehold Allocation ; Economics of Gender; Non-labor Discrimination ; Time Allocation and Labor Supply ; Wages, Compensation, and Labor Costs: General
• Subject: gender wage gap ; household models ; household production ; labor markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hermann Frederiksen, Elisabeth
• Event: Veröffentlichung
• (who): University of Copenhagen, Economic Policy Research Unit (EPRU)
• (where): Copenhagen
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/82014
• Last update: 10.03.2025, 11:45 AM CET