How Does Equal Pay for Equal Work Legislation Affect Female Employment & Plant Performance? A Di erence-in-Discontinuity Design

This paper provides new evidence on the effects of equal pay for equal work regulations on the employment of women and firm performance in the manufacturing industry. Using a recently extended database of Chilean manufacturing... [ view full abstract ]

This paper provides new evidence on the effects of equal pay for equal work regulations on the employment of women and firm performance in the manufacturing industry. Using a recently extended database of Chilean manufacturing plants, I posit that characteristics of monopsonistic competition in the female labor market contributed to the increase of female employment and female labor percentage contrary to what economic theory of competitive labor markets and wage discrimination a la Becker (1957) would predict. The identification comes from an extension of the regression discontinuity (RD) design, the difference-in-discontinuity design, which exploits the quasi-experimental properties around the policy cutoff. I find that plants in the treated group increase female employment compared to the control group. However, female employment percentage increases only for female executives and white collar workers, consistent with monopsony models of the labor markets that predict that occupations with larger gender wage gaps would see the largest improvements in relative female employment when equal pay is implemented. I also find that plant average wage increases but total factor productivity declines relative to the control group. Sales, gross profit, markup, and net value of production, show no significant effect as a result of the equal pay legislation.