Gender Wage Gap Trends in Europe: The Role of Occupational Allocation and Skill Prices

Abstract

This paper explores the recent gender wage gap trends in a sample of European countries with a new approach that uses the direct measures of skill requirements of jobs held by men and women. During the 1990s and 2000s, the gender wage gap declined in the majority of European countries. Similar to the U.S. experience, a part of this decline is explained by changes in male-female differences in brain and brawn skill intensities that occur due to the shifts in occupational allocations. However, in contrast to the U.S. experience, changes in returns to brain and brawn skills had a widening effect on the gender wage gap. Furthermore, a substantial part of the changes in the gender wage gaps cannot be explained by changes in the gender gaps in labor market characteristics, brain and brawn skills or changes in the wage structure. We find that, the explained part of the gender gap is strongly correlated with labor market institutions, such as employment protection of workers and trade union density. This suggests a strong link between changes in labor market institutions and changes in gender wage gap trends.