The Pink Tax: Why Do Women Pay More?

Abstract

We study the question of whether women, on average, pay a price premium — a so-called “pink tax” — for the products they buy. A particular concern facing policy makers is whether such differences are a form of gender based price discrimination. Using scanner data, we find that averaged across the entire retail grocery consumption basket, women pay 4% more per unit for goods in the same product-by-location market as do men. This price differential is generated by a 15% higher average per unit price paid by women on explicitly gendered products, like personal care items, as well as a 3.8% higher average per unit price paid by women on ungendered products, like packaged food items. Higher prices paid by women could be the result of differences in demand elasticity, competitive structure, or sorting into goods with differing marginal costs. To disentangle these mechanisms, we estimate demand differences between men and women and structurally decompose price differences into markups and marginal costs. We find that women are, on average, more price elastic consumers than men, suggesting that as a consumer base women are not likely to be charged higher markups under price discrimination. Overall, we find that the pink tax is not sustained by higher markups charged to women, but by women sorting into goods with higher marginal costs and lower markups.

Keywords: gender, price discrimination, discrimination, inequality, markets

JEL Classification: L0, L1, L11, I3, J16