Journal Article

Estimating a Dynamic Adverse-Selection Model: Labour-Force Experience and the Changing Gender Earnings Gap 1968–1997

George-Levi Gayle and Limor Golan

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 79, issue 1, pages 227-267
Published in print January 2012 | ISSN: 0034-6527
Published online September 2011 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rdr019
Estimating a Dynamic Adverse-Selection Model: Labour-Force Experience and the Changing Gender Earnings Gap 1968–1997

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  • Demand and Supply of Labour
  • Labour Discrimination
  • Econometric and Statistical Methods and Methodology: General
  • Labour and Demographic Economics
  • Wages, Compensation, and Labour Costs
  • Information, Knowledge, and Uncertainy
  • Game Theory and Bargaining Theory
  • Econometric Modelling

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This paper addresses two questions: What accounts for the gender gap in labour-market outcomes? What are the driving forces behind the changes in the gender labour-market outcomes over the period 1968–1997? It formulates a dynamic general equilibrium model of labour supply, occupational sorting, and human-capital accumulation in which gender discrimination and an earnings gap arise endogenously. It uses this model to quantify the driving forces behind the decline in the gender earnings gap and the increase in female labour-force participation, the proportion of women working in professional occupations, and hours worked. It finds that labour-market experience is the most important factor explaining the gender earnings gap. In addition, statistical discrimination accounts for a large fraction of the observed gender earnings gap and its decline. It also finds that a large increase in aggregate productivity in professional occupations plays a major role in the increase in female labour-force participation, number of hours worked, and the proportion of females working in professional occupations. Although of less importance, demographic changes account for a substantial part of the increase in female labour-force participation and hours worked, whereas home production technology shocks do not.

Keywords: Gender earnings gap; Statistical discrimination; Occupational sorting; Human Capital; Structural estimation of dynamic games; Dynamic general equilibrium; Adverse selection; Signalling; J01; J20; J31; J71; C50; C72; C13; D82

Journal Article.  16029 words.  Illustrated.

Subjects: Demand and Supply of Labour ; Labour Discrimination ; Econometric and Statistical Methods and Methodology: General ; Labour and Demographic Economics ; Wages, Compensation, and Labour Costs ; Information, Knowledge, and Uncertainy ; Game Theory and Bargaining Theory ; Econometric Modelling

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