Dangerous Liaisons: A Social Network Model for the Gender Wage Gap
KU Leuven - Faculty of Business and Economics (FBE)
Utrecht University - Utrecht University School of Economics; KU Leuven - Center for Economic Studies
We combine stylized facts from social network literature with findings from the literature on the gender wage gap in a formal model. This model is based on employers' use of social networks in the hiring process in order to assess employee productivity. As a result, there is a persistent gender wage gap, with women being underpaid relative to men after controlling for productivity characteristics. Networks exhibit inbreeding biases by productivity and by gender, which in combination with women's lower network density cause women to be hired less often through referral, as well as receive a lower average referral wage premium. Finally, we use 2001-2006 UK Labour Force Survey data to test the hypotheses implied by our model. We find that networks do indeed account for a significant part of the gender wage gap for newly hired workers.
Number of Pages in PDF File: 27
Keywords: social networks, gender wage gap, imperfect information
JEL Classification: J16, J31working papers series
Date posted: October 17, 2007
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