Importing Equality? The Effects of Increased Competition on the Gender Wage Gap

Abstract

It is now well documented that the gender wage gap declined substantially in the 1980s, despite rising overall wage inequality. While Blau and Kahn (JoLE 1997) attribute much of this improvement to gains in women's relative labor market experience and other observable characteristics, a substantial part of the decline in the gender wage gap remains unexplained and may be due to reduced discrimination against women in the labor market. This paper tests the hypothesis (based on Becker 1957) that increased globalization in the 1980s forced employers to reduce costly discrimination against women and thus accounted for part of the "unexplained" improvement in the gender pay gap.

To test this hypothesis, we calculate the change in the residual gender wage gap across industries (as well as cities) over time using CPS data from 1977 - 1994, and test the correlation between this measure and changes in import shares. The wage data are further broken down by the type of market structure in an industry, i.e., whether the industry is concentrated or competitive. Since concentrated industries face little competitive pressure to reduce discrimination, an increase in competition from increased trade should lead to a reduction in the residual gender wage gap. We use a difference-in-differences approach to compare the change in the residual gender wage gap in concentrated versus unconcentrated sectors, using the latter as a control for changes in the gender wage gap that are unrelated to competitive pressures. The findings indicate that increased competition through trade did contribute to the narrowing of the gender wage gap, suggesting that, at least in this sense, trade may benefit women relative to men.

JEL Classification: J7, J13