Analysing the gender wage gap Empirical evidence from Germany and the United States
Master thesis
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https://hdl.handle.net/11250/3090304Utgivelsesdato
2023Metadata
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- Master Thesis [4380]
Sammendrag
The main objective of this thesis is to investigate the potential sources of the gender wage gap
in Germany and the United States. For that purpose, we employ high quality microdata sets
from the German Socio-Economic panel (SOEP) and IPUMS CPS. We use cross-sectional
data for the years 1989 and 2019 to study a representative sample of full-time employees
between the age of 25 to 64. By employing the Kitagawa-Oaxaca-Blinder (KOB)
decomposition method (Kitagawa 1955; Oaxaca 1973; Blinder 1973) we estimate how much
of the unadjusted gender wage gap in the countries is attributed gender differences in measured
characteristics. Furthermore, by applying a Juhn, Murphy, and Pierce (JMP) (1991)
decomposition we investigate how relative improvements in terms of characteristics and rising
return to these characteristics affects the gender wage gap over time. The aim is to understand
if increasing overall inequality counterbalances women’s progress in the labour market and
has a widening effect on the gender wage gap. Lastly, Blau and Kahn (1996) find that countries
with more compressed wage distributions have smaller gender wage gaps. We investigate this
by a JMP decomposition of the U.S.-German difference in the gender wage gap to understand
if differences in return to characteristics is the most important contributor to international
differences in the gender wage gap.
The results show that the gender wage gap declines in Germany and the United States between
1989 and 2019. The results from the KOB decomposition show that gender differences in
observable characteristics in total no longer explain the gender wage gap for these countries
in 2019. Gender differences in distribution by industry however continues to explain malefemale
wage disparities over the period studied. The JMP results show that changes in the
return to characteristics negates some of the progress made by female workers over the period.
Lastly, the most important factor for explaining the U.S- German difference in the gender
wage gap is the relative differences in return to characteristics. This effect was however
stronger in 1989 and reflects that the wage distribution in Germany have become more
dispersed over the period of study and is thus more similar to that observed in the United
States.