Differences in Labor Supply to Monopsonistic Firms and the Gender Pay Gap: An Empirical Analysis Using Linked Employer‐Employee Data from Germany

Hirsch, Boris; Schänk, Thorsten; Schnabel, Claus

doi:10.1086/651208

Cited by 168 publications

(178 citation statements)

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“…if wages increase by 1%, men's labor supply increases by 3.7% and women's by 2.6%). (Incidentally, these numbers coincide with empirical estimates for Germany [4].) Suppose further, that the employer's workforce consists of…”

Section: What Is Monopsonistic Wage Discrimination and How Does It Work?supporting

confidence: 67%

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Gender wage discrimination

Hirsch¹

2016

izawol

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ProsEvidence shows that monopsonistic wage discrimination can account for a large part of the unexplained gender wage gap. Once monopsonistic wage discrimination has been recognised, it can be straightforwardly countered by raising women's sensitivity to wages, through a range of measures. Equal pay legislation may raise women's wages without harming their employment. ELEVATor PiTcHThere are pronounced and persistent wage differences between men and women in all parts of the world. A significant element of these wage disparities can be attributed to differences in worker and workplace characteristics, which are likely to mirror differences in worker productivity. However, a large part of these differences remains unexplained, and it is common to attribute them to discrimination by the employer that is rooted in prejudice against female workers. Yet recent empirical evidence suggests that, to a large extent, the gaps reflect "monopsonistic" wage discrimination-that is, employers exploiting their wage-setting power over women-rather than any sort of prejudice. AUTHor's MAiN MEssAGEA growing body of international evidence suggests that a substantial part of the unexplained gender wage gap stems from imperfect competition in the labor market. This monopsonistic wage discrimination arises when employers exploit their more pronounced wage-setting power over female workers, whose labor supply to the single employer is less sensitive to wages. Since wage discrimination raises employers' profits, it is fostered by market forces and thus likely to persist in the long term. Fighting monopsonistic discrimination involves introducing policy measures to raise women's wage sensitivity, for example, through improved childcare or more flexible working hour arrangements, as well as introducing equal pay legislation. consEmployers profit from discriminating against women whose labor supply to the single employer is less sensitive to wages. Since monopsonistic wage discrimination raises employers' profits, it is likely to be widespread and to persist in the long term. Apart from some suggestive findings, direct evidence on the drivers of women's lower wage sensitivity is still lacking. Very little is currently known on whether employers really make use of their more pronounced wagesetting power over women. Gender wage discriminationDoes the extent of competition in labor markets explain why female workers are paid less than men?

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Section: What Is Monopsonistic Wage Discrimination and How Does It Work?supporting

confidence: 67%

“…German social security data, study mentioned above [4], there exists supportive evidence on monopsonistic gender wage discrimination for the US [5], [6], Australia [7], Italy [8], and Norway [9].…”

Section: Study Samplementioning

confidence: 90%

Gender wage discrimination

Hirsch¹

2016

izawol

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“…Taking the perspective of employees first, women may be less inclined than men to leave firms in distress. They usually face higher search frictions and are less mobile than men, not least due to family reasons, and there is some empirical evidence that women's labor supply to the firm is substantially less elastic than men's (see Manning, 2003 andHirsch et al, 2010). In contrast, management may find it easier to lay off women than men since they often have less tenure and firm-specific human capital.…”

Section: Introductionmentioning

confidence: 99%

Lingering illness or sudden death? Pre-exit employment developments in German establishments

Fackler¹,

Schnabel²,

Wagner³

2013

Industrial and Corporate Change

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Using a large administrative data set for Germany, this article compares employment developments in exiting and surviving establishments. Applying a matching approach, we find a clear "shadow of death" effect reflecting lingering illness: in both West and East Germany establishments shrink dramatically already several years before closure, employment growth rates differ strongly between exiting and surviving establishments, and this difference becomes stronger as exit approaches. Moreover, we provide first evidence that prior to exit the workforce becomes on average more skilled, more female, and older in exiting compared to surviving establishments. These effects are more clearly visible in West than in East Germany.JEL classification: L2, D22, J65.

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“…In our data sample we find that men teaching in Missouri school districts are paid slightly more than a six percent premium relative to women with equivalent experience and education (see Table A1). Manning (2003) and more recently Hirsch, Schank and Schnabel (2008) suggest that some of the observed pay differential between men and women may be due to different labor supply elasticities to the employer. Ransom and Oaxacca (2008) show that the equality of marginal costs across inputs for profit maximizing firms implies a direct relationship between the log wage gender gap and differing labor supply elasticities to a firm:…”

mentioning

confidence: 99%

Estimating the Firm’s Labor Supply Curve in a “New Monopsony” Framework: Schoolteachers in Missouri

Ransom

Sims

2010

Journal of Labor Economics

123

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. In the context of certain dynamic models, it is possible to infer the elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage. Using this property, we estimate the average labor supply elasticity to public school districts in Missouri. We take advantage of the plausibly exogenous variation in pre-negotiated district salary schedules to instrument for actual salary. Instrumental variables estimates lead to a labor supply elasticity estimate of about 3.7, suggesting the presence of significant market power for school districts, especially over more experienced teachers. The presence of monopsony power in this labor market may be partially explained by institutional features of the teacher labor market. JEL Classification:J42, J63

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Differences in Labor Supply to Monopsonistic Firms and the Gender Pay Gap: An Empirical Analysis Using Linked Employer‐Employee Data from Germany

Abstract: Empirical studies usually find that women's labor supply is more elastic than men's at the level of the market, but some researchers argue informally that this relationship reverses at the level of the individual firm.

Cited by 168 publications

References 23 publications

Gender wage discrimination

Gender wage discrimination

Lingering illness or sudden death? Pre-exit employment developments in German establishments

Estimating the Firm’s Labor Supply Curve in a “New Monopsony” Framework: Schoolteachers in Missouri

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