Determining Gender Differences in Education and Labor Market Outcomes

This paper studies gender differences in educational attainment and labor market compensation. Across a group of OECD countries, college attainment rates and college premia are higher for women than men, despite a gender wage gap in favour of college educated men. The gap in the college premium is positively correlated with the gender difference in college attainment rates. This paper explores potential explanations for these patterns. The approach is to estimate the parameters of a dynamic model of education choice and labor market outcomes that allows for information frictions, and then decompose the observed gender gaps through a series of counterfactual exercises. These gaps are driven mainly by gender differences in the average compensation at non-college jobs. The estimated lower compensation for non-college educated women generates for them larger college premia and higher incentives to attend college relative to men. The outcome is that women have a higher college rate despite being paid less for both college and non-college jobs. For Germany and Italy, where the college premium is higher for men, the gaps are largely explained through taste shocks capturing the influence of family and peers