Gender wage gap studies: consistency and decomposition

This paper reviews the empirical literature on the gender wage gap, with particular attention given to the identification of the key parameters in human capital wage regression models. This is of great importance in the literature for two main reasons. First, the main explanatory variables in the wage model, i.e., measures of work experience and time-out-of-work, are endogenous. As a result, applying traditional estimators may lead to inconsistent parameter estimates. Second, empirical evidence on the gender wage gap hinges on estimates of the parameters of interest. Accordingly, their economic meaning may be limited by restrictive assumptions included in wage models. This challenges both researchers and policymakers who require precise measures of the gender wage gap in order to create and enforce efficient equality policies. This paper is a substantially revised version of the first chapter of my thesis. I am grateful to Christian Dustmann and Wendy Carlin for their great support and comments. I also thank Bernd Fitzenberger, colleagues at the Norwegian School of Economics and Business Administration and IZA, and three anonymous referees for their helpful comments and suggestions.