What is the Role of Firm-Specific Pay Policies on the Gender Earnings Gap in Canada?
48 Pages Posted: 7 Dec 2020 Last revised: 16 Apr 2023
Abstract
Using data from the Canadian Employer-Employee Dynamics Database between 2001 and 2015, we examine the impact of firms' hiring and pay-setting policies on the gender earnings gap in Canada. Consistent with the existing literature and following Card, Cardoso, and Kline (2016), we find that firm-specific premiums explain nearly one quarter of the 26.8% average earnings gap between female and male workers. On average, firms' hiring practices ââ¬â due to difference in the relative proportion of women hired at high-wage firms, or sorting ââ¬â and pay-setting policies ââ¬â due to differences in pay by gender within similar firms ââ¬â each explain about one half of this firm effect. The compositional difference between the two channels varies substantially over the life-cycle, by parental and marital status, and across provinces.
Keywords: gender wage gap, firm effects, marital status, linked employer-employee data, pay-setting, sorting
JEL Classification: J16, J31, J51, J71
Suggested Citation: Suggested Citation