Measuring links between labor monopsony and the gender pay gap in Brazil

Brandon Vick

doi:10.1186/s40176-017-0099-x

Abstract

This paper focuses on gender differences in job mobility and earnings for workers in Brazil. Monopsony theory suggests a link between the wage elasticity of labor supply and wage penalties. Should one group of workers be less elastic in their supply choices, that group is predicted to earn less than others. To measure wage elasticity, I estimate a hazard model on voluntary job separations using the RAIS, a linked employer-employee dataset that captures formal-sector workers’ job durations over time. Four models are specified and point to significant gender differences. Across the models, male elasticity ranges from 1.638 to 2.175 while female elasticity ranges from 1.22 to 1.502. The female wage penalty predicted by these elasticity differences ranges from 11.4 to 20.5%, compared to an actual gender wage difference of 16.4%. Results of higher male elasticity are robust to the use of a more parsimonious specification, a discrete-time approach, the use of job spell data for a single year, and disaggregation by region. I extend the model through decomposition methods to help clarify the association between earnings, job separations, and elasticity.

Highlights

IntroductionThis paper is concerned with the ability of workers to make transitions from their jobs in response to wage signals
Do gender differences in job mobility explain gender differences in pay? This paper is concerned with the ability of workers to make transitions from their jobs in response to wage signals
4.1 Elasticity results and the gender wage gap: full model This section presents male and female elasticity estimates calculated from Eq (9) restated in terms of estimated β values: l,w = −2 θsβe + (1 − θs)βne, (11)

Summary

Introduction

This paper is concerned with the ability of workers to make transitions from their jobs in response to wage signals. One possible barrier to job transitions may be a lack of other job opportunities due to few employers in the labor market—the situation of monopsony. Other reasons relate to an inability to move from one’s job even when other employment opportunities are available. This paper uses a dynamic monopsony model that formalizes these constraints to job movement into one theoretical framework and describes how the wage elasticity of labor supply captures a worker’s ability to change jobs in response to wage offers (Manning 2003). The monopsony model predicts that labor supply elasticity is positive— that workers are more likely to leave a low-paying than a high-paying job and that firms attract more workers with higher wage offers. The model predicts a relationship between wage elasticity and earnings differences, illustrated as follows: in a labor market

Methods

Results

Conclusion