The Effects of Firms' Pay Policies and Equal Pay Laws on the Gender Wage Gap in Chile

This paper assesses the total contribution of firm effects to the gender wage gap using a rich dataset of matched employer-employee data from Chile. We estimate two-way fixed effects models that allow us to decompose the... [ view full abstract ]

This paper assesses the total contribution of firm effects to the gender wage gap using a rich dataset of matched employer-employee data from Chile. We estimate two-way fixed effects models that allow us to decompose the contribution of firms to the gender wage gap into bargaining power and sorting effect. We also assess the effects of an Equal Pay law on both channels. We find that women receive about 88% of the firm-specific premium earned by men and that firms' total contribution explains about 49% of the gender wage gap. Sorting effects account for 70 to 80% of the firms' contribution, and the remainder is due to bargaining power effects. The gender wage gap slightly increases after the law, and it has is no effect on neither bargaining power nor sorting effects