Empirical Studies Related to Gender Wage Gap

Albelda, R. P. (1986, April) Occupational segregation by race and gender, 1958-1981. Industrial and Labor Relations, 39(3):404-411.

Amuedo-Dorantes, C. & Mach, T. (2003) Performance pay and fringe benefits. International Journal of Manpower, 24(6):672-698.

Anderson, D. J., Binder, M., & Krause, K. (2003, January) The motherhood wage penalty revisited: Experience, heterogeneity, work effort, and work-schedule flexibility. Industrial and Labor Relations Review, 56(2):273-294.

Bauer, T. & Zimmermann, K.F. (1999) Overtime work and overtime compensation in Germany. Scottish Journal of Political Economy, 46:419-436.

Bayard, K., Hellerstein, J., Neumark, D., & Troske, K. (2003) New evidence on sex segregation and sex differences in wages from matched employee-employer data. Journal of Labor Economics, 21(4):887-921.

Bell, D.N.F. & Hart, R.A. (1999). Unpaid work. Economica, 66:271-290.

Bell, D.N.F., Hart, R.A., Hubler, O. & Schwerdt, W. (2000, March), Paid and unpaid overtime working in Germany and the UK, IZA Discussion Paper Number 133, Bonn, Germany: The Institute for the Study of Labor (IZA).

Blau, F. and DeVaro, J. (2006, April) New evidence on gender differences in promotion rates: An empirical analysis of a sample of new hires. Working paper. Princeton, NJ: Princeton University.

Blau, F.D., Ferber, M.A., & Winkler, A.E. (2007) The economics of women, men, and work. (5th ed.) Upper Saddle River, NJ: Pearson Education, Inc.

Blau, F.D. & Kahn, L.M. (2006, June) The U.S. gender pay gap in the 1990s: Slowing convergence. Discussion paper 2176, Bonn, Germany: Institute for the Study of Labor (published in: Industrial and Labor Relations Review, 2006, 60 (1):45-66) .

Blau, F. D. & Kahn. L.M. (2000) Gender differences in pay. Journal of Economic Perspectives, 14(4):75-99.

Boraas, S. & Rodgers, W.M. III. (2003, March) How does gender play a role in the earnings gap? An update. Monthly Labor Review, 9-15.

Bowler, M. (1999, December) Women's earnings: An overview. Monthly Labor Review, 13-21.

Brooks, P. (1999, June) Compensation inequality. Washington, DC: Bureau of Labor Statistics.

Budig, M. J. and England, P. (2001, April) The wage penalty for motherhood. American Sociological Review, 66(2):204-225.

Correll, S. J, Benard, S. & Paik, I. (2007, March) Getting a job: Is there a motherhood penalty? American Journal of Sociology, 112(5):1297-1338.

Cortes, P. & Tessada, J. (2008, May) Cheap maids and nannies: How low-skilled immigration is changing the labor supply of high-skilled American women. Working paper. Chicago, IL: University of Chicago and Cambridge:MA: Massachusetts Institute of Technology.

Costa, D.L. (2000) Hours of work and the Fair Labor Standards Act: A study of retail and wholesale trade, 1938-1950. Industrial and Labor Relations Review, 53(4):648-664.

Dey, J.G. & Hill, C. (2007, April) Behind the pay gap. Washington, DC: American Association of University Women Educational Foundation.

DiNatale, M. & Boraas, S. (2002, March) The labor force experience of women from "Generation X". Monthly Labor Review, 3-15.

Even, W.E. & Macpherson, D.A. (1990) The gender gap in pensions and wages. Review of Economics and Statistics, 72(2):259-265.

Fields, J. & Wolff, E. (1995, October) Interindustry wage differentials and the gender wage gap. Industrial and Labor Relations Review, 49(1):105-120.

Gabriel, P.E. (2005, July) The effects of differences in year-round, full-time labor market experience on gender wage levels in the United States. International Review of Applied Economics, 19(3):369-377.

Groshen, E. (1991) The structure of the female/male wage differential: Is it who you are, what you do, or where you work? Journal of Human Resources, 26(3):457-472.

Gruber, J. (1994, June) The incidence of mandated maternity benefits. American Economic Review, 84(3):622-641.

Hamermesh, D.S. & Trejo, S.J. (2000, February) The demand for hours of labor: Direct evidence from California. The Review of Economics and Statistics, 82(1):38-47.

Hartmann, H., Sorokina, O. & Williams, E. (2006, December) The best and worst state economies for women. Washington, DC: Institute for Women's Policy Research.

Johnson, G. & Solon, G. (1986, December) Estimates of the direct effects of comparable worth policy. American Economic Review, 76:1117-1125.

Johnson, T.D. (2008, February) Maternity leave and employment patterns of first-time mothers: 1961- 2003. Household Economic Studies. Washington, DC: U.S. Census Bureau.

Joy, L. (2006, April) Occupational differences between recent male and female college graduates. Economics of Education Review, 25(2):221-231.

Levine, L. (2003, April) The gender wage gap and pay equity: Is comparable worth the next step? Washington, DC: Congressional Research Service.

 

Light, A. & Ureta, M. (1995) Early-career work experience and gender wage differentials. Journal of Labor Economics, 13(1):121-154.

Lowen, A. & Sicilian, P. (2008) "Family-friendly" fringe benefits and the gender wage gap. Journal of Labor Research. Online publication date: March 12, 2008.

Mandel, H. & Semyonov. M. (2005, December) Family policies, wage structures, and gender gaps: Sources of earnings inequality in 20 countries. American Sociological Review, 70:949-967.

McCrate, E. (2005, March) Flexible hours, workplace authority, and compensating wage differentials in the US. Feminist Economics, 11(1):11-39.

Morrisey, M. (2001, September) Why do employers do what they do? Compensating differentials. International Journal of Health Care Finance and Economics, 1(3-4): 195-201.

Mulligan, C.B. & Rubinstein, Y. (2008, August) Selection, investment, and women's relative wages over time. Quarterly Journal of Economics, 123(3):1061-1110.

Oaxaca, R. (1973, October) Male-female wage differentials in urban labor markets. International Economic Review, 14(3):693-708.

Olson, C. (2002) Do workers accept lower wages in exchange for health benefits? Journal of Labor Economics, 20(2):91-114.

Pannenberg, M. (2002, October), Long-term effects of unpaid overtime: Evidence for West Germany, IZA Discussion Paper Number 614, Bonn, Germany: The Institute for the Study of Labor (IZA).

Phelps, E. (1972, September) The statistical theory of racism and sexism. American Economic Review, 62(4):659-661.

Plasman, R. & Sissoko, S. (2004, December). Comparing apples with oranges: Revisiting the gender wage gap in an international perspective. Discussion Paper Series, Brussels, Belgium: Institute for the Study of Labor.

Rhine, S. L.W. (1987, December) The determinants of fringe benefits: Additional evidence. Journal of Risk and Insurance, 54(4):790-799.

Rose, S & Hartmann, H. (2004) Still a man's labor market: The long-term earnings gap. Washington, DC: Institute for Women's Policy Research.

Sanborn, H. (1964, July) Pay differences between men and women. Industrial and Labor Relations Review, 17(4):534-550.

Sheiner, L. (1999, April) Health care costs, wages, and aging. Washington, DC: Federal Reserve Board of Governors.

Solberg, E. & Laughlin, T. (1995, July) The gender pay gap, fringe benefits, and occupational crowding. Industrial and Labor Relations Review, 48(4):692-708.

 

Spivey, C. (2005, October) Time off at what price? The effects of career interruptions on earnings. Industrial and Labor Relations Review, 59(1):119-140.

Trejo, S.J. (2003, April), Does the statutory overtime premium discourage long workweeks?, Industrial and Labor Relations Review, 56(3):530-551.

Trejo, S.J. (1993) Overtime pay, overtime hours, and labor unions. Journal of Labor Economics, 11(2):253-278.

Trejo, S.J. (1991, September) The effects of overtime pay regulation on worker compensation. American Economic Review, 81(4):719-740.

U. S. Department of Labor, Bureau of Labor Statistics (2008, October) Highlights of Women's Earnings in 2007, Report 1008.

U. S. General Accounting Office (2003, October) Women's earnings: Work patterns partially explain difference between men's and women's earnings. Washington, DC: General Accounting Office.

Weinberg, D. (2007, July/August) Earnings by gender: Evidence from Census 2000. Monthly Labor Review: 25-34.

WFD Consulting. (2006, October) Workplace flexibility for lower wage workers. Washington, DC: Corporate Voices for Working Families. 

Are Corporations People?

Behavioral Economics

A recent story on National Public Radio ( link) gives an overview of a subfield of economics called behavioral economics. Behavioral economics incorporates elements of psychology into economic theory. Some people believe that behavioral economics will improve economic models because it makes a correction for what they believe are errors in the assumptions of classical economics. As a result many people have come to think that behavioral economics may even justify the unprecedented amount of government intervention in the economy and improve our lives. 

First, I would say that the term 'behavioral economics' is very misleading from the start. I don't doubt that there may be ways that concepts from psychology could improve certain aspects of economic models. However, a better term would be psychological economics, cognitive economics, or psychonomics. Economics in general is the study of choices, and how they are made compatible in a world of scarce resources. It is already all about behavior. To name a subfield 'behavioral economics' is redundant and confusing.

Secondly, a major criticism of classical economics is the assumption that people are perfectly rational and perfectly informed. As the article states:

"Economists literally assume that the agents in the economy are as smart as the smartest economist," Thaler says. "And not just smart: We're not overweight; we never overdrink; and we save just enough for retirement. But, of course, the people we know aren't like that.......An imperfectly rational human being challenges a really important idea: the notion that markets work well because individuals can be counted on to make the best choice for themselves."

  One problem is that people get too excited about behavioral economics and over exaggerate the fact that people are not perfectly rational. We all know that people don't always appear rational, and don't always make the best decisions. Some people make very bad decisions. When people learn that economic 'theory' assumes that people are perfectly rational, a naive reaction is that economics has to be wrong.  That is a huge mistake.

As an example, we might learn in science class that the earth is not perfectly round and smooth, but we still use perfectly round smooth globes to learn about geography. We all know that most pool players don't do physics and calculus in their heads for every shot they take, but the shots can be easily modeled using the laws of physics. We don't trash globes or stop teaching physics in schools just because these 'models' aren't exactly like the real world. In fact these models are useful only because they are not exactly like the real world. They approximate the real world just enough to be useful. To make these models match the real world exactly would make them so complex that they wouldn't be easy to use.

In fact, one of the major criticisms of behavioral economics is that it makes models too complex to be useful. From a the Economist's View blog David Andolfatto writes:

"There are an infinite number of ways in which people might be irrational; and the behavioral theorist is forced to choose among an infinite number of "behavioral rules" that he or she believes captures this irrationality in a plausible manner. The only hope that a behavioral theorist has for developing a general theory is in discovering that people are irrational in some systematic manner."

A lot of people are holding out hope that 'behavioral economics' will save us from ourselves. That it will allow us to break a basic law of nature: that people own themselves and that you as an individual are the best person to decide what is best for you. If behavioral economics allows this, then there is no limit to what government can do. Suddenly there is no limit to how high taxes can be raised. We can raise the wages for the poor and cap the wages of the rich with no consequence. We can print as much money as we want and not worry about inflation. We can ignore large budget deficits. We can tell car companies what kind of cars to build and return them to profitability. We can tell farmers what kind of crops to grow and how to raise their livestock and still feed the world.

Even if behavioral economics were to offer great breakthroughs, another subfield of economics called Public Choice casts doubt on whether our elected leaders would actually put better policies ahead of their own personal and political party's gain, or that they would have sufficient knowledge to do it. Perhaps, as mentioned in the article, government officials don’t have to be hyper rational or perfectly informed to paint words on sidewalks, but when it comes to a very complicated world, and the billions of decisions made every day (even to make something as simple as a pencil), governments are not immune to the fundamental problem of economics.  

With the basic assumptions of economics, we've seen that people do appear to respond to incentives. We see that tax cuts can lead to job creation and economic growth. We see that minimum/living wages lead to decreased opportunities for the most disadvantaged. We see that printing large amounts of money leads to inflation. People don't have to be perfectly rational for the most basic principles of economics to be relevant, and behavioral economics likely won't change this. ( see Gregory Mankiw's 10 Principles of Economics ).

I, Pencil and I, Smartphone

Keynes vs. Hayek Rap Videos

PART I




PART II

Can Tax Cuts Increase Government Revenue?

Data Related to Taxes and Revenue:

From 2001-2007, in the face of cuts in marginal taxes, we saw tax revenues surge by 30%, while the deficit was reduced by 61% from 2004-2007.

A visualization of the changes in tax revenue and deficits during the 1980's (after sharp drops in marginal tax rates) as well as the more recent period from 2003-2007 

Published Research:

"The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks", by Christina Romer and David Romer.  http://ideas.repec.org/p/nbr/nberwo/13264.html

Finds that a $1 decrease in taxes may lead to a $3 increase in GDP.

Lindsey, Lawrence B. 1987. "Individual Taxpayer Response to Taxcuts, 1982-1984." J. of Public Economics 33 (July) 173-206

Found elasticity of taxable income by income category to be .728 for income > $50k, 1.023 for >$100k, 1.413 for >$250k, and 2.0 for > $1 million. Also derived the tax revenue responses to reductions in marginal taxes for those earning more than $200k / yr. Revenues increased by 19% in 1982, 35% in 1983, 56% in 1984.

Other work indicates a negative effect of tax rates on economic growth and stimulus.

Keynesian Multipliers and Fiscal Stimulus Policy

"Among academics over the last 30 years, the idea of fiscal stimulus has been discredited and in graduate courses, it is "taught only for its fallacies." - John Cochrane, University of Chicago Booth School of Business

"The calculations that I have seen supporting the stimulus package are back-of-the-envelope ones that ignore what we have learned in the last 60 years of macroeconomic research."  -Thomas Sargent, New York University, Nobel Prize in Economics 2011

"We believe two factors are behind this rather tepid rebound. An obvious one is the severe financial crisis that precipitated this recession, with many major financial institutions receiving large bailouts from the federal government...Faced with a highly uncertain policy environment, the prudent course is to set aside or delay costly commitments that are hard to reverse. The result is reluctance by banks to increase lending…These facts suggest that it was a serious economic mistake to press for a hasty, major transformation of the U.S. economy on the heels of the worst financial crisis in decades. A more effective approach would have been to concentrate first on fighting the recession and laying solid foundations for growth.”  - Gary Becker,Steven Davis & Kevin M. Murphey, Uncertainty and the Slow Recovery, Wall Street Journal January 4, 2010.

"Did Stimulus Dollars Hire the Unemployed?: Answers to Questions About the American Recovery and Reinvestment Act," by Garett Jones and Daniel Rothschild. Mercatus Center, August 30, 2011 Also featured on EconTalk with Russ Roberts. 

"Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2). Thus, there was an almost even split between “job creating” and “job switching.” This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed."

Much of the empirical work related to the size of spending multipliers has been completed by Valerie Ramey. (see also her EconTalk Podcast discussion of her work with economist Russ Roberts)

Identifying Government Spending Shocks: It's all in the Timing
Valerie Ramey. Quarterly Journal of Economics, February 2011.
http://qje.oxfordjournals.org/content/early/2011/03/21/qje.qjq008.full

Abstract: Standard vector autoregression (VAR) identification methods find that government spending raises consumption and real wages; the Ramey–Shapiro narrative approach finds the opposite. I show that a key difference in the approaches is the timing. Both professional forecasts and the narrative approach shocks Granger-cause the VAR shocks, implying that these shocks are missing the timing of the news. Motivated by the importance of measuring anticipations, I use a narrative method to construct richer government spending news variables from 1939 to 2008. The implied government spending multipliers range from 0.6 to 1.2
.

Does Government Spending Stimulate Private Activity? by Valerie Ramey. July 12, 2011. Prepared for the NBER "Fiscal Policy After the Financial Crisis" preconference.
http://weber.ucsd.edu/~vramey/research/NBER_Fiscal.pdf

Abstract:This paper asks whether increases in government spending stimulate private activity, in the form of either private spending or private employment. The first part of the paper studies private spending. Using a variety of identification methods and samples, I find that in most cases private spending falls significantly in response to an increase in government spending. These results imply that the average GDP multiplier lies below unity. In order to determine whether concurrent increases in tax rates dampen the spending multiplier, I use two different methods to adjust for tax effects. Neither method suggests perceptible effects of current tax rate changes on the spending multiplier. In the second part of the paper, I explore the effects of government spending on labor markets. I find that increases in government spending lower unemployment. However, most specifications and samples imply that virtually all of the effect is through an increase in government employment, not private employment. I thus conclude that on balance government spending does not appear to stimulate private activity.

Can Government Purchases Stimulate the Economy? by Valerie Ramey. June 14, 2011. Prepared for the Journal of Economic Literature Forum on the Multiplier.
http://weber.ucsd.edu/~vramey/research/JEL_Fiscal_14June2011.pdf

Conclusion: The U.S. aggregate multiplier for a temporary, deficit financed increase in government purchases (that enter separately in the utility function and have no direct effect on private sector production functions) is probably between 0.8and 1.5. Reasonable people can argue, however, that the data do not reject 0.5 or 2.

 

Owyang, Michael T., Ramey, Valerie A. and Zubairy, Sarah. Are Government Spending Multipliers Greater During Periods of Slack? Evidence from 20th Century Historical Data. [PDF Document]. Federal Reserve Bank of St. Louis. Economic Research Division. Working Paper 2013-004A. January 2013.

“A key question that has arisen during recent debates is whether government spending multipliers are larger during times when resources are idle. This paper seeks to shed light on this question by analyzing new quarterly historical data covering multiple large wars and depressions in the U.S. and Canada. Using an extension of Ramey’s (2011) military news series and Jordà’s (2005) method for estimating impulse responses, we find no evidence that multipliers are greater during periods of high unemployment in the U.S. In every case, the estimated multipliers are below unity. We do …nd some evidence of higher multipliers during periods of slack in Canada, with some multipliers above unity.”

Several economists have also studied the impacts of the New Deal Policies during the Great Depression. 

Some Observations on the Great Depression
Edward C. Prescott,Adviser Research Department Federal Reserve Bank of Minneapolis
Federal Reserve Bank of Minneapolis Quarterly Review
Winter 1999, vol. 23, no. 1, pp. 25–31

Abstract:  The Great Depression in the United States was largely the result of changes in economic institutions that lowered the normal or steady-state market hours per person over 16. The difference in steady-state hours in 1929 and 1939 is over 20 percent. This is a large number, but differences of this size currently exist across the rich industrial countries. The somewhat depressed Japanese economy of the 1990s could very well be the result of workweek length constraints that were adopted in the early 1990s. These constraints lowered steady-state market hours. The failure of the Japanese people to display concern with the performance of their economy suggests that this reduction is what the Japanese people wanted. This is in sharp contrast with the United States in the 1930s when the American people wanted to work more.

 FDR's policies prolonged Depression by 7 years, UCLA economists calculate (Press Release) New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis. Harold L. Cole and Lee E. Ohanian. Journal of Political Economy , Vol. 112, No. 4 (August 2004), pp. 779-816

Abstract: There are two striking aspects of the recovery from the Great Depression in the United States: the recovery was very weak, and real wages in several sectors rose significantly above trend. These data contrast sharply with neoclassical theory, which predicts a strong recovery with low real wages. We evaluate the contribution to the persistence of the Depression of New Deal cartelization policies designed to limit competition and increase labor bargaining power. We develop a model of the bargaining process between labor and firms that occurred with these policies and embed that model within a multisector dynamic general equilibrium model. We find that New Deal cartelization policies are an important factor in accounting for the failure of the economy to recover back to trend.

The Great Depression in the United States From A Neoclassical Perspective
Federal Reserve Bank of Minneapolis Quarterly Review
Winter 1999, vol. 23, no. 1, pp. 2–24
Link

Abstract: Can neoclassical theory account for the Great Depression in the United States— both the downturn in output between 1929 and 1933 and the recovery between 1934 and 1939? Yes and no. Given the large real and monetary shocks to the U.S. economy during 1929–33, neoclassical theory does predict a long, deep downturn. However, theory predicts a much different recovery from this downturn than actually occurred. Given the period’s sharp increases in total factor productivity and the money supply and the elimination of deflation and bank failures, theory predicts an extremely rapid recovery that returns output to trend around 1936. In sharp contrast, real output remained between 25 and 30 percent below trend through the late 1930s.We conclude that a new shock is needed to account for the Depression’s weak recovery. A likely culprit is New Deal policies toward monopoly and the distribution of income.

"Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Returned After the War," by Robert Higgs. The Independent Review, Spring 1997. http://www.independent.org/pdf/tir/tir_01_4_higgs.pdf

and via Podcast at EconTalk with Russ Roberts 

Conclusions:  The economy remained in the depression as late as 1940 because private investment had never recovered sufficiently after its collapse during the Great Contraction. During the war, private investment fell to much lower levels, and the federal government itself became the chief investor, directing investment into building up the nation’s capacity to produce munitions. After the war ended, private investment, for the first time since the 1920s, rose to and remained at levels sufficient to create a prosperous and normally growing economy....the insufficiency of private investment from 1935 through 1940 reflected a pervasive uncertainty among investors about the security of their property rights in their capital and its prospective returns.

Wartime Prosperity? A Reassessment of the Wartime Economy of the 1940s," by Robert Higgs. Journal of Economic History, March 1992.  http://www.independent.org/newsroom/article.asp?id=138

ABSTRACT: Relying on standard measures of macroeconomic performance, historians and economists believe that “war prosperity” prevailed in the United States during World War II. This belief is ill-founded, because it does not recognize that the United States had a command economy during the war. From 1942 to 1946 some macroeconomic performance measures are statistically inaccurate; others are conceptually inappropriate. A better grounded interpretation is that during the war the economy was a huge arsenal in which the well-being of consumers deteriorated. After the war genuine prosperity returned for the first time since 1929.

2013-21| FRBSF Economic Letter

Uncertainty and the Slow Labor Market Recovery

Sylvain Leduc and Zheng Liu

http://www.frbsf.org/economic-research/publications/economic-letter/2013/july/us-labor-market-uncertainty-slow-recovery/

 “Since 2009, U.S. job vacancies have increased but unemployment has fallen more slowly than in past recoveries. There is evidence that heightened uncertainty about economic policy has been an important factor behind this change. Increased uncertainty may discourage businesses from filling vacancies, thereby raising unemployment. An estimate indicates that, without policy uncertainty, the unemployment rate in late 2012 would have been close to 6.5%, 1.3 percentage points lower than the actual rate.”

The Enterprising Americans: A Business History of the United States
BY JOHN CHAMBERLAIN 1963

http://www.entrewave.com/freebooks/docs/a_pdfs/jcea.pdf

One central theme behind Roosevelt's stimulus policies, like today, was that business was sitting on their hands and the government had to tax and spend to get things going and regulate to keep them going and prevent the next downturn. But as Chamberlain pointed out:

"the magnitude of the response of U.S. business to the war is in itself refutation of the thesis that in the thirties businessmen simply sat on their hands…it simply would not have been able to produce the new type of goods when the war button was pressed"

While it was true that total investment was low, investment opportunities were proliferant. He points out the infinite number of industries ready to bust out with thier innovations, including such leaders as du Pont, Dow Chemical, American Cyanamid, and Monsanto that many in the ag industry would be familiar with. During this time GE was ready to go with flourescent lighting and Kodak with color photography and commercial air travel was in the making.

But these great ideas were suppressed and kept on the back burner under the massive interventions of Roosevelt's expanding government.

"Businessmen came to ask themselves whether Roosevelt really understood a system where the hope of profit sparks expansion and investment. Or did he believe simply in centralizing decision and authority in boards and "planners" along the Potomac?"