The Gender Pay Gap: Micro Sources and Macro Consequences

We use administrative linked employer-employee data from Brazil to document that a large share of the gender pay gap is explained by women working at relatively low-paying employers. To shed light on the gender pay gap across employers, we establish three novel facts on revealed-preference ranks of employers by gender. First, employment is concentrated among high-ranked but not necessarily high-paying employers for both genders. Second, women's ranking of employers is less increasing in pay compared to that of men. Third, both pay and ranks of a given employer differ between women and men. To rationalize these facts, we develop an empirical equilibrium search model featuring endogenous gender differences in pay, amenities, and recruiting intensities across employers. The estimated model suggests that compensating differentials explain one-fifth of the gender gap, that there are significant output and welfare gains from eliminating gender differences, and that an equal-pay policy fails to close the gender pay gap.