Home Production, Market Production and the Gender Wage Gap: Incentives and Expectations

28 Pages Posted: 5 Aug 2005

See all articles by Stefania Albanesi

Stefania Albanesi

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Claudia Olivetti

Boston College; National Bureau of Economic Research (NBER)

Rasmus Lentz

Boston University - Department of Economics; University of Copenhagen - Centre for Applied Microeconometrics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2005

Abstract

This paper explores the hypothesis that gender wage differentials arise from the interaction between the intra-household allocation of labor and the contractual relation between firms and workers in the presence of private information on workers' labor market attachment. In our model, if firms believe women to be less attached to market work than men, they will offer them labor contracts with lower earnings and lower hours even in the absence of gender differences in productivity. This implies that it is efficient for wives to allocate more time to home production. Hence, women will be less attached to market work and firms' expectations are confirmed. If firms instead believe that labor market attachment is the same across genders, they will offer the same labor contracts to male and female workers. Then, the efficient intra-household allocation of labor will not be related to gender. It is statistical discrimination that determines gender differentials in the first type of equilibrium. Given that firms may use gender as a screening device, discrimination actually reduces the incentive problem for firms, eliminating adverse selection. Additionally, our model predicts that, in equilibria with female discrimination, gender earning gaps should be higher in industries/occupations in which the incentive problem is more severe. We use Census data for the year 2000 to show that this is the case.

Keywords: Labor contracts, gender wage gaps, incentives, private information

JEL Classification: D13, D82, J31, J33, J70

Suggested Citation

Albanesi, Stefania and Olivetti, Claudia and Lentz, Rasmus, Home Production, Market Production and the Gender Wage Gap: Incentives and Expectations (April 2005). CEPR Discussion Paper No. 4984. Available at SSRN: https://ssrn.com/abstract=771984

Stefania Albanesi (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

HOME PAGE: http://www.columbia.edu/~sa2310/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Claudia Olivetti

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rasmus Lentz

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-6324 (Phone)

University of Copenhagen - Centre for Applied Microeconometrics

University of Copenhagen, Building 26
Ă˜ster Farimagsgade 5
Copenhagen K., DK-1353
Denmark

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