The Effect of Unfair Chances and Gender Discrimination on Labor Supply

53 Pages Posted: 7 Feb 2020

See all articles by Nickolas Gagnon

Nickolas Gagnon

Maastricht University - Department of Economics; University of Arizona - Economic Science Laboratory

Kristof Bosmans

Maastricht University

Arno Riedl

Maastricht University; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Netspar

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Date Written: January 14, 2020

Abstract

Labor market opportunities and wages may be unfair for various reasons, and how workers respond to different types of unfairness can have major economic consequences. Using an online labor platform, where workers engage in an individual task for a piece-rate wage, we investigate the causal effect of neutral and gender-discriminatory unfair chances on labor supply. We randomize workers into treatments where we control relative pay and chances to receive a low or a high wage. Chances can be fair, unfair based on an unspecified source, or unfair based on gender discrimination. Unequal pay reduces labor supply of low-wage workers, irrespective of whether the low wage is the result of fair or unfair chances. Importantly, the source of unfair chances matters. When a low wage is the result of gender-discriminatory chances, workers matched with a high-wage worker substantially reduce their labor supply compared to the case of equal low wages (-22%). This decrease is twice as large as those induced by low wages due to fair chances or unfair chances coming from an unspecified source. In addition, exploratory analysis suggests that in response to unequal pay, low-wage male workers reduce labor supply irrespective of the source of inequality, whereas low-wage female workers reduce labor supply only if unequal pay is due to gender-discriminatory chances. Our results concerning gender discrimination indicate a new reason for the lower labor supply of women, which is a prominent explanation for the gender gap in earnings.

Keywords: Labor Supply, Wage Inequality, Procedural Fairness, Gender Discrimination

JEL Classification: D90, E24, J22, J31, J71, M5

Suggested Citation

Gagnon, Nickolas and Bosmans, Kristof and Riedl, Arno M., The Effect of Unfair Chances and Gender Discrimination on Labor Supply (January 14, 2020). Available at SSRN: https://ssrn.com/abstract=3519540 or http://dx.doi.org/10.2139/ssrn.3519540

Nickolas Gagnon

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

University of Arizona - Economic Science Laboratory ( email )

Tucson, AZ 85721
United States

Kristof Bosmans

Maastricht University ( email )

Netherlands

HOME PAGE: http://https://sites.google.com/site/kristofbosmansmu/

Arno M. Riedl (Contact Author)

Maastricht University ( email )

Department of Economics (AE1)
P.O. Box 616
Maastricht, 6200 MD
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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