Tastes for discrimination in monopsonistic labour markets

Abstract

This paper presents a model where wage differences between men and women arise from taste-based discrimination, monopsonistic mechanisms and gender differences in compensating wage differentials. We show how preferences against women affect heterogeneity in firms’ pay policies in the context of an imperfect labour market with non-wage amenities, deriving a test for the presence of taste-based discrimination and of compensating wage differentials. These results inform an analysis of sex pay differences in the Italian manufacturing sector, which shows that preferences for workplaces providing more flexible schedules are a significant determinant of the gender wage gap. Taste-based discrimination mechanisms appear to be significant as well, but small in size.