The Gender Gap and the Sectoral Divide: The Case of Germany 2003

Joan Muysken, Department of economics

Most findings on the existence of a gender gap in wages are biased because they are based on single-equation estimation of a wage equation, ignoring the simultaneous nature of gender-related job allocation and wage determination. Through the introduction of a latent variable, “femininity”, we tackle the problem of simultaneity while accounting for unobserved heterogeneity. Imposing testable restrictions on the reduced form enables us to identify the factors that determine wages and femininity. Our estimation results reveal that the determinants of the gender gap differ strongly between services and manufacturing. The model is estimated using German data for 2003.

Date: 04 April 2006