Household search and the equilibrium gender pay gap

• Department of Economics

Chiara Lacava, Università Federico II di Napoli, will present her paper "Household search and the equilibrium gender pay gap"

We develop and estimate an equilibrium labor market model to quantify the respective roles of labor supply and demand in generating gender earnings gaps over the life cycle. Households with and without children jointly choose specialization, while firms offer wages anticipating endogenous labor supply responses and incorporating gender-specific preferences, job search and productivity wedges. Using German longitudinal household data, we find that labor supply factors account for approximately 60 percent of the gender earnings gap over the life cycle, primarily reflecting gender differences in preferences for work. Firm-side forces are also quantitatively important: statistical discrimination explains 15 percent of the gap, while gender wedges on the side of firms account for 26 percent. We show that parental leave policies generate a persistent decline in female earnings, driven by sustained reductions in hours worked. Counterfactual reforms reducing leave duration and allowance increase fathers’ leave uptake and narrow gender gaps in the short run, but have limited long-run effects.

Co-authors: Alessandro DiNola, Leo Kaas, Haomin Wang