Job Amenities and Earnings Inequality
106 Pages Posted: 2 Aug 2022
Date Written: July 26, 2022
Previous research on prices of job amenities has suffered from simultaneity bias due to workers' unobserved offer sets, resulting in “wrong-signed” compensating wage differentials. I propose a new estimator for amenity prices that uses only a single imprecise proxy for workers' offer sets to identify amenity prices holding their offer sets fixed. My estimation strategy removes imprecision from the proxy for the offer set by using predicted values from a regression of the proxy on wages and amenities. Using price estimates for a set of observed job characteristics, I turn to investigating the role of job amenities in demographic income gaps. I find a large role for costly amenity substitution in explaining the gender pay gap. In contrast, substitution on the basis of observed amenities does not appear to play large roles in income inequalities by race or by parent background.
Keywords: compensating differentials; inequality; occupational choice; gender; race
JEL Classification: C18, C39, C51, J31
Suggested Citation: Suggested Citation