Abstract
Using data from the Canadian Employer-Employee Dynamics Database between 2001 and 2015, we examine the impact of firms' hiring and pay-setting policies on the gender earnings gap in Canada. Consistent with the existing literature and following Card, Cardoso, and Kline (2016), we find that firm-specific premiums explain nearly one quarter of the 26.8% average earnings gap between female and male workers. On average, firms' hiring practices due to difference in the relative proportion of women hired at high-wage firms, or sorting and pay-setting policies due to differences in pay by gender within similar firms each explain about one half of this firm effect. The compositional difference between the two channels varies substantially over the life-cycle, by parental and marital status, and across provinces.
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