No one disputes that a male-female gender wage differential favoring men exists. This study seeks to unearth not only the sources of this differential but also the relative degrees to which the various sources impact the differential. The theories proposed by current literature suggest three principal causes: differences in human capital, crowding discrimination, and other forms of discrimination. This study estimates separate equations for men and women and then uses the regression results to decompose the gender wage differential into the three aforementioned components. We find, after isolating the effects of differences in individual human capital and choice characteristics as well as differences due to crowding, the residual surprisingly accounts for the largest proportion of the gender wage gap. Because the residual is so large, we believe that basic discrimination models must still be necessary and useful. Moreover, when one considers that the human capital differences that do exist may be reflecting feedback effects, the justification for combating societal stereotyping of gender roles becomes even stronger, to promote not only equity but also efficiency in today's labor market.



Included in

Economics Commons