The Impact of Labor Market Selectivity on the Gender Wage Gap

Women earn less money, on average, than men in all industrialized countries. In the past few decades most advanced industrialized nations have witnessed a decline in the gender wage gap, although the size of the gap and the rate of decline varies cross nationally. In this research, we examine how public policies and institutional arrangements influence labor force participation, and the extent to which labor market selectivity affects cross-national estimates of gender equity in earnings. Although there is substantial concern that labor market selectivity may vary systematically across countries, previous research has not constructed reasonable estimates of the effects of selection. Using data from the Luxembourg Income Study (LIS), we estimate the effect of selectivity into the labor force on measures of gender equity in earnings using Bayesian methods developed for non-ignorable non-response. We estimate earnings equations for women and men employed in the paid labor force. We then adjust the earnings gap by estimating expected earnings for women and men not employed in the labor force. The imputed wage can be understood as an effort to monetize the economic status of women who are often ignored in studies of economic inequality. The adjusted wage differential provides a compendium measure of the relative economic status of women as a whole, including those who are not working.