Is There a Gap in the Gap? Regional Differences in the Gender Pay Gap
| DOI | http://doi.org/10.1111/sjpe.12017 |
| Date | 01 September 2013 |
| Author | Boris Hirsch,Marion König,Joachim Möller |
| Published date | 01 September 2013 |
IS THERE A GAP IN THE GAP?
REGIONAL DIFFERENCES IN THE
GENDER PAY GAP
Boris Hirsch*, Marion K€
onig** and Joachim M€
oller***
ABSTRACT
In this paper, we investigate regional differences in the gender pay gap both the-
oretically and empirically. Within a spatial model of monopsonistic competition,
we show that more densely populated labour markets are more competitive and
constrain employers’ ability to discriminate against women. Utilizing a large
administrative data set for western Germany and a flexible semi-parametric pro-
pensity score matching approach, we find that the unexplained gender pay gap
for young workers is substantially lower in large metropolitan than in rural
areas. This regional gap in the gap of roughly 10 percentage points remained
surprisingly constant over the entire observation period of 30 years.
II
NTRODUCTION
One of the most notable stylized facts in labour economics is that women earn
substantially less than men. For instance, the European Commission (2010)
reports an average raw wage differential of about 17.5% for the EU-27 coun-
tries in 2008 and 23.2% for Germany. While part of this gender pay gap is
explained when introducing controls for individual characteristics (such as
education, occupation and experience), a substantial part of the gap remains
unexplained in all EU-27 countries. In addition to reflecting differences in
human capital or occupational segregation not controlled for, this unexplained
part of the gap may mirror discrimination against women.
1
Although still of
*Friedrich–Alexander-University Erlangen–N€
urnberg
**Institute for Employment Research
***Institute for Employment Research, University of Regensburg and IZA
1
For a comprehensive review of the huge empirical literature on the gender pay gap, its
determinants and its evolution over time, see Altonji and Blank (1999). Blau and Kahn
(2003) investigate international differences in the gender pay gap for 22 countries between
1985 and 1994. Moreover, Weichselbaumer and Winter-Ebmer (2005) provide a large meta-
analysis of more than 260 international studies between the 1960s and the 1990s. Finally,
Maier (2007) provides a survey on the German literature.
Scottish Journal of Political Economy, Vol. 60, No. 4, September 2013
©2013 Scottish Economic Society.
412
considerable size, the gender pay gap tends to narrow in most countries as in
Germany over the last decades.
2
While most of the empirical literature on the gender pay gap focusses on
the variation in the gender pay gap across countries and its evolution over
time, an aspect that has attracted far less attention is the regional variation in
the gap within the same country. Although many studies use regional informa-
tion as control variables in the estimations, only few explicitly deal with its
regional dimension. Blien and Mederer (1998), for instance, examine regional
differences in the gender pay gap in Germany based on the wage curve
approach, whereas McCall (1998) deals with the relation between regional
restructuring and gender wage differentials in the United States. For the Uni-
ted Kingdom, Phimister (2005) studies differences in urban wage premia by
gender, while Robinson (2005) analyzes the effect of the national minimum
wage on the gender pay gap across regions. For Canada, Olfert and Moebis
(2006) examine the different impact of rural and urban environments on gen-
der occupational segregation. Lalive and Stutzer (2010) investigate the relation
between the gender pay gap, social norms regarding adequate pay of women
compared with men and differences in life satisfaction on a regional level for
Switzerland. The two studies that are closest to our paper are Loureiro et al.
(2004), who do not find regional differences in the gender pay gap in Brazil,
and Busch and Holst (2008), who find lower gaps in cities than in rural areas
in Germany in 2005. However, to our knowledge, there has been made no
attempt to systematically investigate regional differences in the gender pay gap
and their evolution over time. What is more, there seems to be no economic
theory around that readily explains why there should be such differences. The
following paper is intended to fill these gaps.
The paper is organized as follows. Section II presents our theoretical con-
siderations about the regional dimension of the gender pay gap and derives
several hypotheses that will be tested in our empirical analysis. Section III lays
out our empirical estimation strategy, while Section IV describes the data set
used. Our descriptive and multivariate empirical results are presented in Sec-
tions V and VI. Section VII discusses some checks of robustness, and Sec-
tion VIII concludes.
II THEORY
Beckerian vs. Robinsonian discrimination
Theoretical attempts of explaining discrimination often follow Becker’s (1971)
concept of discrimination due to distaste. As some employers dislike
2
While Maier (2007) arrives at the conclusion that the gap has remained rather stable dur-
ing the last decade, Blau and Kahn (2000) report a decreasing gap for West Germany and
for almost all OECD countries up to the mid-1990s. Taking account of changes in the wage
distributions as well as cohort and life cycle effects, Fitzenberger and Wunderlich (2002) find
that the gap has narrowed substantially at the bottom of the wage distribution but to a lesser
extent at the top. Using linked employer–employee data for Germany, Hinz and Gartner
(2005) arrive at the conclusion that within-job pay gaps have shrunk as well.
REGIONAL DIFFERENCES IN THE GENDER PAY GAP 413
Scottish Journal of Political Economy
©2013 Scottish Economic Society
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