Market Forces and Sex Discrimination

Abstract

The authors report new evidence on the existence of sex discrimination in wages and whether competitive market forces act to reduce or eliminate discrimination. Specifically, they use plant- and firm-level data to examine the relationships between profitability, growth and ownership changes, product market power, and the sex composition of a plant's or firm's workforce. Their strongest finding is that among plants with high levels of product market power, those that employ relatively more women are more profitable. No such relationship exists for plants with apparently low levels of market power. This is consistent with sex discrimination in wages in the short run in markets where plants have product market power. The authors also examine evidence on the longer-run effects of market forces on discrimination, asking whether discriminatory employers with market power are punished over time through lower growth than non-discriminatory employers, or whether discriminatory employers are bought out by non-discriminators. There was found little evidence that this occurs over a five-year period, as growth and ownership changes for plants with market power are generally not significantly related to the sex composition of a plant's workforce.