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UNIVERSITY OF PISA
DEPARMENT OF ECONOMICS AND MANAGEMENT DEGREE COURSE IN MANAGEMENT AND CONTROL
DEGREE THESIS:
GENDER PAY GAP IN THE EUROPEAN UNION
THESIS SUPERVISOR: CANDIDATE:
MARCO ENRICO LUIGI GUIDI SOREMEKUN FOLASADE OMOLARA
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A special thanks goes to my parents who have always supported me since my tinder age, to my lovely sister Olaitan, my one and only sister, thanks for always being there for me. To my little brother Emmanuel, thanks for your encouragement all through my academic journey. To my boyfriend Alessandro, thanks for your wonderful impact in my life and thanks for your support and care. A big thanks to my friends and well-wishers for witnessing another special occasion with me. To my thesis supervisor, I want to thank you for your patient and assistance. Thank you all.
3 INDEX
1 Introduction……….……….……….…...5
2 Wage Theory………...……..6
2.1 Definition of wage theory………...6
2.1.1 Just Price Theory……….……….…....7
2.1.2 Subsistence Theory……….………...7
2.1.3 Wage Fund Theory……….………..8
2.1.4 Surplus Value Theory……….……….………….8
2.1.5 Residual Claimant Theory……….……8-9 2.1.6 Marginal Productivity Theory……….………..………..9
2.1.7 Demand and Supply Theory………..……….……….9
2.1.8 Bargaining Theory……….……….…….………..10
2.1.9 Behavioral Theory………..…….……...10
2.1.10 Investment Theory……….………..………….10
2.2 Further study on wag theory………...……….………11
2.2.1 The contract zone of Pigou (1933) with the neoclassic approach……….……….….11-12 2.2.2 Bargaining power of Chamberlain (1951) with the behavioral approach……….……….13
2.2.3 Bargaining solution of Nash (1950) with the theoretic game approach………..……….………..13-14 2.3 Wage determination………..15
2.3.1 The Marginal Productivity Theory……….…………..15
2.3.2 The Comparative Advantage (or Self-Selection) Theory………15-16 2.3.3 Compensating Difference Theory……….……….………..16
2.3.4 Onerous Working Conditions: Risk of Job Injury or Death………..……….………17-18 2.3.5 The Composition of Pay Packages: Vacations, Pensions, and Other Fringe Benefits……….……..19
2.3.6 Job Location: Regional Wage Differences Associated with Climate, Crime, Pollution, and Crowding………..……….20
2.3.7 Human Capital Theory………..………21-22 2.3.8 Job-Matching Theory………..………..22
2.3.9 Wage Deferral and Effort-Incentive Theory (Agency Theory).………...………..23
2.3.10 Efficiency Wage Theory……….…..24
2.3.11 Comparison of Wage Determination Theories……….25-28 2.4 Wealth accumulation function………..…….…29-32 2.5 Gender wage inequality………..33-38 2.6 Decomposition of the gender wage gap………...………..………….………39-41 3 Gender gap………..………...…42
3.1 Definition of gender gap………..………..……..42
3.2 Causes of gender gap……….………..………43
3.2.1 Uneven access to education……….…..43
3.2.2 Lack of employment equality………..………..……….44
3.2.3 Job segregation………...………….45
3.2.4 Lack of legal protections………..………46
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3.2.6 Poor medical care……….……48
3.2.7 Lack of religious freedom……….…49
3.2.8 Lack of political representation……….……50
3.2.9 Racism………..……….….51
3.2.10 Societal Mindset……….………….………..52
3.3 Types of gender gap……….……….53
3.3.1 The gender pay gap……….……….53
3.3.2 The gender labor force participation gap……….………....54
3.3.3 The gender employment gap……….………55
3.3.4 The gender job insecurity……….……….56
4 Gender pay gap………...………57
4.1 Definition of gender pay gap………57-58 4.1.1 The human Capital Model……….……….59-61 4.1.2 Labor market discrimination……….62
4.2 Causes of gender pay gap………..……….63
4.2.1 Under-representation in leadership……….………63
4.2.2 Working hour………..……….64
4.2.3 Interruption from workforce……….65
4.2.4 Education……….……….66
4.2.5 Feminized Job………..……….67
4.2.6 Inexplicable parts of the gender pay gap………..………68
4.3 Gender pay gap around the world……….………69-70 4.3.1 Sub-Saharan Africa: various funds, various possibilities………71
4.3.2 Europe and Central Asia: evaluated finance with discrimination ……….72
4.3.3 East Asia and the Pacific: The effects of the financial and institutional amendments………73 4.3.4 Western Europe: job and manufacture discrimination……….………….74-75 4.3.5 Profiles of some countries based on gender pay gap……….76-80 4.4 Gender pay gap in the European Union……….……….81-93 5 An essay on gender inequality………...94-96 6 Bibliography and Sitography………...………...……….97-108
5 1. INTRODUCTION
Wages and salary are obtained from all payment that are given to the workers and not to a freelancer. There has been a lot of studies based on wage theory, that used to transform when the financial state changes.
There is a lot of gender discrimination in the society, that has different branches such as the gender wage gap, wage differential and gender pay gap. The society generates a lot of stereotypes in the labour force between men and women, race, religion etc.
Wealth is the key to be able to know the quantity of gender pay inequality, that has a psychological and sociological impact on the lives of people. In this case, I’m going to explain what is wage theory and its forms, and I am going to talk about how gender pay gap still exist in our society, by illustrating the causes and types of gender inequality in the European Union.
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2. WAGE THEORY
2.1. DEFINITION OF WAGE THEORY
Wage theory refers to the income that is paid to the workers in the labour market. Adam Smith was one of the most important exponents with (The wealth of Nation) in 1776. Smith’s reflection on wages was that they were produced through offer and demand in the market and that employees are self-centred in order to meet their own needs by seeking jobs where labour forces are mostly needed. He also discussed on the standard of workers capabilities that was essential for economic growth.
Economic production can turn into a way to have preferable effect in the economic environment and it does not seem to be unreasonable to explain wage as human labour. Talking about wages concerning companies and employees do not have the knowledge about workers skills and this explains about wage dynamics.
In a higher prospective, if companies cannot be impartial then the wage will be inflexible, but it may not be stiff if employees can choose to have another job that can give them best offer in the marketplace, and this will make wages to increase only if there is a difference between the market and the present one.
Wage dynamics tries to determine the relationship between employees and their skills, and to find out about how it works, through market image and acquisition. Becker and Mincer generated the model of human capital joint to an empiric assay. This is to show how incomes rises with a professional experience, and it can be determined only by the theory based on efficiency.
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We can also calculate a present worker’s wage by subtracting his main wage to his years of age and his efficiency and secondly, we have even an inflexible wage, that does not increase with age and efficiency. Wages do not differ from people’s devotion to the marketplace, because it must be the following dedication to labour force:
a. People see labour as a particular factor
b. There is a minimal boundary between struggles and profits
c. It is not appropriate for a benchmark and an extent in terms of wage
There are different types of wage theories which are the following:
1. Just Price Theory
This theory was determined by Plato and Aristotle, they assume that every human being will be predesignated in order to have the same life conditions of their household’s life progression, but the community should allow them to progress by given them enough remuneration in order to be able to sustain a better lifestyle.
1. Subsistence Theory
The major exponent of the theory was David Ricardo, and it is also known as the iron law of wages. Ricardo determines that employees must be remunerated in order to survive, sustain mankind with the intention of avoiding any kind of fluctuation.
When there is a weak wage it reduces man force because of famine and decease, meanwhile if there is a rise in wages it brings a better lifestyle for human race. But this theory has some weaknesses and they are 4 in number, which are the following:
• The rapport between wedlock and wages: it does not seem right to determine that when there is a raise up of salary to a subsistence level, it means that the person can get married by increasing natality. And in the other way, when there is a raise up of salary, people tend to boost up their lifestyles.
• Ignored Demand-side: it values more the supply part and not the demanding part regarding the labour market.
• The difference in wages: it does not clarify the reason why wages vary from job to job and from individuals.
• Ignored Trade unions: it does not take into consideration the importance of the unions, but recently they have a major part in wages determination.
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2. Wage Fund Theory
The economist Adam Smith determined this theory, he explained that the wage level procedure produces excess money for the firm and if the endowment is significant then the wage will be the same too. This theory concentrates on firms and its ability to remunerate. The theory has its own weaknesses such as:
• The difference in wages: there are no differences in wages because all jobs are paid fairly, and wages are different among individuals.
• The demand factor ignored: labour force supply is more essential than demand. • Existence of fund: there is an existence of distinct amount of money that are used
for salaries, but sincerely speaking there is not such that can demonstrate that. • Objection on homogeneous labour: labour is uniformed in this theory, and it
assumes that workers must receive payment evenly, but it just seems to be impossible.
3. Surplus Value Theory
Karl Marx explains this theory, by saying that labour force is considered as a product that is meant for trade and he assumes that labour can valorise products. The proprietor will not declare the real sum of money received from the client by, using a small amount to pay wages to the worker. Marx forecasted the constraint on the society, but it was not the reason why there was a herd to wages into subsistence level, but it is caused by a high level of inoccupation. Marx determined that the cause of inoccupation was because of capitalist, by clarifying to Ricardo that the equivalent of good was resolute by the amount of time of labour that is required to form it. In Marx’s belief, labour force was only a tool, in order to trade for a job, so that a worker can have a high wage. Nevertheless, he supposed that the firm would constraint the employee to work harder in order to have a good salary and the excess rate would be held by the firm. But this discussion with the labour theory of value and the subsistence theory of wages were rejected.
5. Residual Claimant Theory
This theory was proposed by Francis Walker, he assumed that there are 4 elements that brings a surplus to goods and they are land, labour, capital and entrepreneurship. The earnings from goods was apportioned between the 3 elements, just like a remuneration that is contrary to their input. The residual part was given to workers as salary, that is contrary to their value and it is called residual claimant.
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The theory has been denounced for some following aspects:
• Supply influence ignored: it does not consider the impact of supply, when talking about wage determination.
• Role of trade unions: it does not justify the reason of increase of salary.
• Entrepreneur right: we can say that the residual claimant theory is the right one and not labour force and it claims its own part in the manufacturing aspect.
• Case of loss: if a firm goes through a deficiency, then it will have a negative impact on labour too.
6. Marginal Productivity Theory
The exponent of this theory is Phillips Henry Wicksteed and John Bates, they assume that demand and supply function defines wages and that the employee are remunerated according to their financial pay. The minimal notion is that firms will always hire workers only on a condition that he generates surplus value than the worth and this will make the owner to have a higher gain by not remunerating the non-minimal employees.
7. Demand and Supply Theory
This theory explains the interrelation between supply and demand and the rate of pay is figured out identically. The labour supply depends on elements like society, movability of labour and social organization. Perhaps, wages will be figured out to where demand and supply meets a break point
10 8. Bargaining Theory
The theory is determined by John Davidson, he assumes that the negotiation force of workers is figured out by the wage rate.
9. Behavioural Theory
Rules, cultures, purposes, kindliness and social tensions have an impact on pay configuration. Wages have to gratify worker’s necessity according to Maslow and Herzberg, like health, safety and etc.
10. Investment theory
This theory was founded by H.M. Gitelman, who presumed that every employee has a bundle of assets like background, practicing and skills, in which everyone are committed to in their job background. He determined that employee's remuneration is mended through labour ratio and employees can restraint their remuneration.
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2.2 FURTHER STUDY ON WAGE THEORY
This discussion on wage theory was brought up by Adam Smith through literature but it was
through the economist Pigou that analytically formed the theory. There is a way of how employees and owner's insight the highest and lowest wage rates that allows barriers, but the weakness in this discussion is that there is not a solution for this theory. Many have tried to find the best solution, but the nearest one was found by Hicks (1963), but it found out to be impossible to demonstrate. Another economist was Nash (1950-1953) who found the right solution to this theory with the so-called game theory, but it does not justify the level of impact on this theory.
There are 3 different models:
1. The contract zone of Pigou (1933) with the neoclassic approach
2. Bargaining power of Chamberlain (1951) with the behavioural approach 3. Bargaining solution of Nash (1950) with the theoretic game approach
1 The contract zone of Pigou (1933) with the neoclassic approach
It refers to minimum and maximum wage rate where the last one establishes itself. Pigou assumes that anytime wages are connected to negotiation that means that it has to be defined by the bipartite monopolistic theory, but it is not seen as the best concurrent answer and wages should not be defined by the demand and supply model. Wages do not equalize demand and supply force, only when both parts agree to define a higher and lower wage, but it can reduce the bargaining limits.
The barrier is the highest wage that trade asks for without any negative depletion and the lowest barrier is the lowest wage that owners should give so that they can have many workers.
This image below is the so called “sticking point” which must be private between union and employer and not public to third parties.
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Chamberlain, N. W., Collective Bargaining, New York: McGraw-Hill, 1951; 2 Nash, J. F., Jr., "The Bargaining Problem," Econometrica, 1950, Vol. 18, pp. 155-162; 3 Pigou, A. C, The Economics of Welfare, London: Macmillan and Co., Ltd., 1933.
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2. Bargaining power of Chamberlain (1951) with the behavioural approach
The model states that it is very highlighted, and it is known as the ability of groups to have an accord. The bargaining power is under the impact of ploy with the amount generated by not having a deal. The deal might be resolved when the amount of dissent is more than the amount of assent, which can be influenced by other variance and will have a repercussion on the power.
Chamberlain does not accept Pigou’s model, because he sustains the reasons of the barriers are different and that when we consider the bargaining power, there is no need to differentiate situations and individuals' attitude towards the barrier.
3. Bargaining solution of Nash (1950) with the theoretic game approach
He determined this approach in order to have an opinion on the undefined disposition of Von Neumann and Morgenstem (1944) by saying that: "In Theory of Games and
Economic Behaviour a theory of n-person games is developed which includes as a special case the two-person bargaining problem. But the theory there developed makes no attempt to find a value for a given n-person game, that is, to determine what it is worth to each player to have the opportunity to engage in the game. This determination is accomplished only in the case of the two-person zero sum game...."
He assumes that to have the right solution it is necessary to have a bit of premises, that usually differs from others and they are:
• Parties involved are sensible
• Parties involved tend to increase their own profit
• Ideal report
• Pareto optimality
• Hard work negotiation
• When the negotiator’s last pay seems not suitable to have a deal, then the negotiators will have a profit that leads to default
• The parties involved differs from each other when their profit is not equal or else it will become an equality premise
And this is demonstrated by this graphic below:
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Chamberlain, N. W., Collective Bargaining, New York: McGraw-Hill, 1951; 5 Nash, J. F., Jr., "The Bargaining Problem," Econometrica, 1950, Vol. 18, pp. 155-162; 6 Pigou, A. C, The Economics of Welfare, London: Macmillan and Co., Ltd., 1933
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The wage determination is divided into several categories that are the following:
1 The Marginal Productivity Theory
It is the most important theory and it has been existing since the 19th century. It was I. von Tunen and M. Longfield who established the Marginal Productivity Theory, but it was J. B. Clark who described it in a better form. He was the one that assumed the theory as an utterance of social equality and his assumptions are the fundament of the theory. There are other exponents of this presumption and they are P. Samuelson, J. Hicks, E. Chamberlain, P. Douglas, and Joan Robinson. It was Hicks that promulgated the book that talks about wage determination theory.
This presumption is called the still condition of economics where we have a clean contest, but not a technical improvement, there is no doubt or exposure. But these conditions in an economic situation implies that the amount of salary can be resolved with the procedure of the production maximization into an econometric stage. This means that companies will have to reduce the production expense that is equal to the marginal productivity theory that lays on rate in order to expound about the assumption and it has a suggestion that say that the most hard-working worker obtains an increase of salary.
2 The Comparative Advantage (or Self-Selection) Theory
This assumption is usually in a deliberate trade presumption and it was expounded by Roy and Champemowne, D. G. This presumption has a diverse exertion when talking about competence and different kinds of work that necessitate of new ability and proficiency.
Champemowne explains the cohabitation of these conditions that they might produce an asymmetric allocation of salary remunerations. So, we can say that less employees might have a significant pay, but the rest of the workers will have a minimal pay.
In 1985 Heckman and Sedlacek, approximates the significance of accumulation prejudice into a measured accumulation of salary ratio and they assessed the part of freedom of choice into disparity in registered wage ratio.
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7 Champemowne, D. G., "A Model of hicome Distribution," Economic Journal, 1953, Vol.
63, pp. 318-51 8
Heckman, James J., and Sedlacek, Guilherme, "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-Selection in the Labor Market,"
Journal of Political Economy, 1985, Vol. 93, No. 6, pp. 1077-1125.
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They assume that the so-called self-selection decreases the accumulation of wage disparity at almost 1/10 of the USA market, and another economist called Teulings established that this theory would be suitable for the Netherlands in 1995. Teulings assumes that wage disparity is scheduled to see the differences in allocations and divergences among occupations.
3 Compensating Difference Theory
It regards to some adverse, unwanted and unfriendly work specifics. This theory is a representative of Adam Smith’s book called the The Wealth of Nations, but it has been existing years back where it was withheld till when the information gathering technology and estimations were upgraded and it was shaped by Friedman and Kuznets in 1954. In 1986 a physicist called Rosen argued on this theory, by saying that a lot of occupations are difficult, unsafe, untidy, rowdy or too much of heat or cold in the work environment, but some employers finds them appealing. Like what a Japanese professor called Tachibanaki said in 1996 that "this theory considers the case in which workers'
tastes and satisfactions differ". The people that work in this kind of unfriendly occupation are
remunerated with a higher pay, or else it might be hard for a firm to entice employees. People have different preference, so if there is a lower pay it means that it does not interest the employees to get the job. We call premium pay, the amount of money paid by the firm in order to attract the employees to accept the job.
The premium pay is used to allow labor force finance to be fruitful but it is shown as an unpleasant job. Rosen affirms that, "the actual wage paid is therefore the sum of two conceptually distinct
transactions, one for labor services and worker characteristics, and another for job attributes .... The observed distribution of wages clears both markets overall worker characteristics and job attributes.... The resulting market equilibrium associates a wage with each assignment"
There are some forms of non-pay characteristics of occupations that are figured out by McConnel and Brue in 1995 and Rosen in 1986, that are the reason why there are unequal labor distribution curves and remedial remuneration.
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10 Teulings, Coen N., "The wage distribution in a model of the assignment of skills to jobs,"
Journal of Political Economy, 1995, Vol. 103, No. 2, pp. 280-315
11 Tachibanaki, Toshiaki, Wage Determination and Distribution in Japan, Oxford: Clarendon Press, 1996
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12 Friedman, M. and Kuznets, S., Income from Independent Professional Practice, New13 York:NBER, 1954.
Rosen, Sherwin, "The Theory of Equalizing Differences," Ashenfelter, O., and Layard, R., ed. Handbook of Labor Economics, Amsterdam: North-Holland, 1986, pp. 641- 692.
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4 Onerous Working Conditions: Risk of Job Injury or Death.
Death and injury at work have a bad impact on labor provision. The possibility of this bad situations and discomfort in occupations are significant for the function of labor supply. The salary ratio represents intrinsic costs that are defined by them, that are known as compensating wage differentials. According to the neoclassic aspect, we can say that the trade will redress employees that do a risky job with a better pay than what they collect in a safer occupation.
There are different types of premises that are emphasized, and they are:
(1) workers with similar skills will look for a job in the same labor market. (2) workers prefer higher wages than lower wages.
(3) workers are risk averse.
(4) firms offer varying combinations of wages and risk. (5) workers have mobility or exit options.
(6) workers have enough information about which job is hazardous or safe. 7) workers are rational.
With these premises, it will be easier to determine the right rate in order to cover the tacit side that is significant to the expensive job situation.
The correlation among wage and these requirement are a topic in an economical and psychic documents and the menaces connected to them are: “ cigarette smoking, cancer, motor vehicle
accidents (Jones-Lee,1976; Viscusi, Magat, and Huber, 1991; Miller and Guria, 1991), asteroid,
York: McGraw-Hih, hicl995.
15 Leigh, Paul J., "Compensating Wages for Job-Related Death: The Opposing Arguments,"
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work accident (Acton, 1973; Gerking, DeHaan, and Schulze, 1988), home accident, poisoning (Viscusi and Magat, 1987; Viscusi, Magat, and Huber, 1987; Viscusi, Magat, and Forrest, 1988), fire, aviation accident (Jones-Lee, 1976). Viscusi (1979) has estimated a five percent average-earnings premium for risk of injury or death in the American economy”.
Paul, Charles, and Keith (1997) determines that the gains of employees that have a higher percentage of decease, have a large income, more than other employees that do not mug any danger. A better insight on this discussion is made by Viscusi (1993).
But the empiric research shows the favorable connection among death risk and salary ratio and Leigh (1989) affirms that the market does not produce a better salary for risky jobs.
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5. The Composition of Pay Packages: Vacations, Pensions, and Other Fringe Benefits.
Remuneration consists of salary and merits that is even called benefits that consists of retirement, medical coverage, vacations and other welfares. Welfares are very different between firms that
15Jones-Lee, Michael W., The value of life: An economic analysis, Chicago: U. of Chicago Press, 1976.
16 Viscusi, W. Kip, Magat, Wesley A. and Huber, Joel, "An Investigation of the Rationahty of Consumer Valuations of Multiple Health Risks,"
Rand J. Economics, 1987, Vol. 18, No. 4, pp. 465-79
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17 Viscusi, W. Kip, Magat, Wesley A. and Forrest, Anne, "Altruistic and Private Valuations
of Risk Reduction," Journal of Policy Analyses and Management, 1988, Vol. 7, No. 2, pp. 227-45.
18 Viscusi, W. Kip, Employment hazards: An investigation of market performance. Cambridge: Harvard U. Press, 1979. 19 Viscusi, W. Kip, "The Value of Risks to Life and Health," Journal of Economic Literature, 1993, Vol. 31, No. 4, pp. 1912-46.
20 Miller, Ted and Guria Jagadish, "The Value of Statistical Life in New Zealand," Report to the Ministry of Transport, Land Transport Division,
1991
21 Gerking, Shelby, DeHaan, Menno H. and Schulze, William, "The Marginal Value of job Safety: A Contingent Valuation Study," Journal of Risk
Uncertainty, 1988, Vol. 1, No. 2, pp. 185-99.
22 Acton, Jan P., Evaluating public program to save lives: The case of heart attacks, R-950- RC. Santa Monica: The Rand Corporation, 1973. 23 Viscusi, W. Kip, "The Value of Risks to Life and Health," Journal of Economic Literature, 1993, Vol. 31, No. 4, pp. 1912-46.
24 Leigh, Paul J., "Compensating Wages for Job-Related Death: The Opposing Arguments," Journal of Economic Issues, 1989, Vol. 23, No. 3,
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employs people by paying the same high salary, but the salary that is given to the employee can be similar to the one of the bosses by paying even welfares with the salaries.
It is known that employees would rather choose jobs that gives welfare benefits or companies that gives higher benefits than others. There is a parable narrated by firms that hire workers that says, "a
dollar as a dollar", this implies their distress over full remuneration due to the fact that it has an
impact on production and gains.
Woodbury and Huang, 1991 says that: “. There are some reasons why an employer should spend a
dollar on benefits rather than on wages. One of the most important reasons is that the money put into pensions and health services is not taxed”.
There are some other probabilities that welfare benefits might expand employee’s performance by joining employees to employers in order to decrease rotation price. This discussion has an opposite correlation among salary level and the price of welfare benefits to firms.
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25Woodbury, Stephen A. and Huang, Wei-Jang (1991), The tax treatment of fringe benefits, Kalamazoo, Michigan: W. E. Upjohn Institute for
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6. Job Location: Regional Wage Differences Associated with Climate, Crime, Pollution, and Crowding.
Job placement is very important in terms of wages, there are different places that have vary weather climate, high level of unlawful acts or air pollution and it can be in quite or rowdy areas that can allure some employees to accept some jobs instead in other locations.
Employees choice are based on spot comforts against spot discomforts that brings wage disparities. Those specifics like vary weather climate, high level of unlawful acts or air pollution and etc. can be seen as discomforts by employees and especially where discomforts are considerable, firms have no choice than to pay much more in order to have more man force.
Remuneration are only for spot discomforts when the occupation resettlement is impossible, like it is not possible for a college to be transferred. An outflow among locations are impossible to weed out the necessity for wage disparities, when man force cannot be able to have an impact on regions specifics.
According to Gleen, Berger, and Hoehn (1988) they demonstrate that: “on average, workers are
willing to pay for living and working in less a polluted environment and that locations with more sunshine and better visibility decrease average wage rates by nearly 7 percent and 1 percent, respectively. Humidity, windspeed, crime, and superfluid sites located in the county increase the average wage by nearly 7 percent, 14 percent, 6 percent, and 16 percent, respectively”. And these
premises bargain on occupational safety, likelihood of salary progression, occupational training and academic needs.
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26 Gleen, Blomquist, Mark Berger, and John Hoehn, "New Estimates of the Quality of Life in Urban Areas," American Economic Review, 1988, Vol. 78, Table 1.
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7. Human Capital Theory
It is one of the most famous and crucial remuneration determination theory, that comes from Adam Smith and Gary Becker who styled it in a refined form. This theory takes into consideration even occupation and labor turnover, and it explains that the human capital that consist in academic training and occupational training pleads for a higher part of wage disparities. And it is demonstrated that people who have a good academic training are those who have a salary increase. This assumption has 2 sides that are as following:
a. Investment in Human Capital.
The purpose of doing an investment is regarded to an equal spending for the main cost and the current utility of further gains that can be achieved from it. An issue for this part might be a material target or even individuals over educational background. To spend money on human resources, it shows that the awareness and abilities of an individual base on forthcoming gains will probably be increased. Thurow, (1975) says that: “More schooling increases earnings because employers
believe a person with more schooling is more productive and that employees with more education can be trained more easily”. Even Spence (1973) explains the model by saying that: “Once investment in human capital is considered a tool for improving productivity, this tool serves as a sorting device, one that helps firms determine which workers will be more productive on the job”
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27 Thurow, L. C, Generating Inequality: Mechanisms of Distribution in the US Economy, New York: Basic Books, 1975. 28 Spence, A. M, "Job Market Signaling," Quarterly Journal of Economics, 1973, Vol. 87, No. 3, pp. 355-74.
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b. On-The-Job Training
There are some commercial abilities that are attained by occupational training and they can be divided in two forms that are the official and unofficial training. The official training sustains skill and traineeship programs, but it explains that this is usually unofficial. The unofficial training comes especially from everyday businesses like watching skillful and knowledgeable employees, dialogue among employees or even short-term replacement, so it is hard to identify and quantify and it is subordinated to prices and welfare benefits. It is necessary to take a purpose for the current utility and the inner ratio of profit system.
8. Job-Matching Theory
Jovanovic (1979) is the developer of the theory by saying that: “there is a positive correlation
between wages and tenure and a negative relation between wages and turnover and since workers differ in their suitability to different firms, only those workers who are matched well with a job continue to be employed or to receive higher wages. If the worker and job not matched well, the worker will be unemployed (either voluntarily or involuntarily) or receive lower wages”.
Even Liu (1986) states that: “job matching arises as a result of incomplete information and
heterogeneity in the labor market and that it has been argued that a firm offers higher wages as tenure progresses, over or above the market wage”. So, it is obvious that there is a resemblance the
two theories.
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29 Jovanovic, Boyan, "Job Matching and The Theory of Tumover," Journal of PoliticalEconomy, 1979, Vol. 87, pp. 972-990.
30 Liu, Pak-Wai, "Human Caphal, Job Matching and Eamings Growth between Jobs: An Empirical Analysis," Applied Economics, 1986, Vol. 18,
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Then, we have Tachibanaki (1996) that explains that: “job-matching theory is not counter doctrine
to the human capital theory and that a wage growth path is likely to be positive for employees who stay with current employers, on the basis of human capital theory, such as a firm's specific human capital accumulation”. Last but not the least we have Garen (1988) that claims that: “job-matching theory emerged as an alternative to human capital theory on the basis of wage-tenure and wage- turnover relationships”.
9. Wage Deferral and Effort-Incentive Theory (Agency Theory)
We have this theory because of the costly aspect of keeping an eye on employee’s efficiency. Alchian and Demsetz (1972) explains that: “if the productivity of workers is independent of each
other and the output of each worker is easily monitored, a piece rate system (payment per piece) induces an efficient level of effort by the worker, but the output cannot be monitored easily if production process involves team production and so, the worker's output cannot be used as a basis of rewards or payments and to avoid shirking, one policy that a firm can implement is to pay lower wages for a worker whose tenure is relatively short and a higher wage for a worker whose tenure is relatively long”. And as for Lazear (1979) he assumes that: “In the case of a younger worker, some portion of his or her payments is deferred. For the deferred portion, a bond is issued”. It is
the employee that missed the value of attachment, when the person is fired because of a nonobservance of conditions of the work agreement and when the value of the depletion increases, then the employee will be discouraged from evading. Consequently, the employee will have a decrease of salary than his own minor asset throughout his work level and so even much more.
10
31 Tachibanaki, Toshiaki, Wage Determination and Distribution in Japan, Oxford: Clarendon Press, 1996
.
32 Garen, John E., "Empirical Studies of the Job Matching Hypothesis" in Ehrenberg, Ronald G., ed. Research in labor economics. Vol. 9, A
Research Annual Greenwich, Conn, and London: JAI Press, 1988, pp. 187-24.
33Alchian, Armen A. and Demsetz, Harold, "Production, Information Costs, and Economic Organization," American Economic Review, 1972, Vol.
62, No. 5, pp. 777-795.
24
10. Efficiency Wage Theory
Employers might discover that it is unproductive to shorten wage when there is a strong inoccupation. This expounds the correlation among wages and output, that is a discussion for this theory. This theory explains that man force efficiency is a result of salary remunerated by a company and that when there is an increase of salary, then there will be an increase of its worker’s labor standard. This is to explain that the salary standard of an employee allows them to have a higher performance, since employees try harder to cope with the increase of bonuses offered by the employer. And when we have the gain, employers might try to damage performance by reducing salaries.
Yellen (1984) claims that: “the efficiency wage theory explains five labor market phenomenon and
they are as following:
• Involuntary unemployment. • Real wage rigidity.
• Dual markets.
• The existence of wage distribution for homogenous workers. • Discrimination among observationally distinct groups;”.
And he argues that there are 4 important elements for this, and they are: the shirking models, labor turnover models, adverse selection models, and the sociological models.
11
35Yellen, Janet L., "Efficiency Wage Models of Unemployment," American Economic Review, Vol. 74, No. 2, Papers and Proceedings of the
25
11. Comparison of Wage Determination Theories
The research of wage determination theories claims that it can be related to some specific aspects in the man force market. The appropriateness of labor for the occupation can be skills, performance and man force’s choices that are defined as a parameter of all the assumptions. The usual point of these assumptions is that the employer is a connection to the defined wage and characteristics aspects of the market that can have an impact on wage determination. It is the employer that monitors the work area, where he performs his duty, performance and skills of the employees and the necessity to form new employees and employers are considered as disciples or receptors. It is the company that provides salaries, employs and commences the negotiation procedures when it is necessary and the first level of the determination of wages starts from companies. Aoki (1986) affirms that: “The central role of the firm between the determined wage and factors that affect that
determination in the theories is not surprising since orthodox academic view postulates that the firm is managed in the sole interest of shareholders, and workers are recruited to serve as an instrument to achieve this goal”. The location of the company in these assumptions are viewed in the next
chart. This chart shows the outline of these assumptions by representing their importance, but they do not demonstrate the total procedures of these theories. We have Figure 2.4 that represents this chart:
12
26
The procedure of determination of wages is premised on the marginal productivity theory in an economic science environment and the procedure needed are identical. The procedure start with a company that observes the performance of a uniform and a diverse labor and finishes with a higher gain. The essential divergence among them is that the performance of labor is a role of various specifics of employees. The job-matching theory assumes that the employees performs better when they are appropriate for the work, then we have the agency theory that concentrates on the performance in defining wages. The human capital theory expounds the relevance of instruction and academic training on performance, even though the comparative advantage theory implies that the remuneration should differ to have a various level of performance.
27
The efficiency wage theory is illustrated in the following chart:
There is another type of model that shows that employees are the initial proposers when there is an alteration in benefits, and it is represented in the following chart:
29
2.4 WEALTH ACCUMULATION FUNCTION
The wealth accumulation function is defined with a W that means the richness of a person in a certain time known as t and that this rely upon the accrued richness. We consider even the person’s life savings represented by an S in a certain term t, presents or patrimonies represent with an H in a certain period t, and then the profit represented with an r gained by the formerly gathered capitals in the period t.
Capitals might stay in place in various properties that has several profits and menaces, and that signifies that:” 𝑊𝑡 − 1 = ∑ =𝑛
𝑎 1 𝑤𝑎,𝑡−1 𝑎𝑛𝑑 𝑎 𝑠𝑖𝑔𝑛𝑖𝑓𝑖𝑒𝑠 𝑡ℎ𝑒 𝑘𝑖𝑛𝑑 𝑜𝑓 𝑝𝑟𝑜𝑝𝑒𝑟𝑡𝑦".
“Wealth accumulation over periods can be described as: 𝑊𝑡 ∑𝑛=1
𝑎 (1 + 𝑟𝑎𝑡)𝑤𝑎.𝑡 + 𝑆𝑡 + 𝐻𝑡
and the total savings S of an individual in the current period, regardless of asset types, depend on the total after-tax income Y and total spending C in that period”:
𝑆𝑡 = 𝑌𝑡 - 𝐶𝑡
This type of function differs from gender for a diverse motive. Initially, we can find the disparity between gender through various package of patrimonies. The wealth function for people differs vastly because it relies upon their different menace priorities. There are different researches on this topic, that demonstrate that the female sex creates an extra moderate finance and they tend to be risk opposed. Some studies where done by Jianakopolos and Bernasek (1998), Grable (2000), Hallahan et al. (2004), Nelson (2015). And others like Bajtelsmit and Bernasek (1996), Hinz et al (1997), Embrey and Fox (1997) says that: “They also have lower stock market participation rates than men
do”
13
37 Bajtelsmit, V., Bernasek, A. (1996): Why do women invest differently than men? Financial Counselling and Planning, 7, pp. 1–10.
38Doss, C. R. (2013): Intrahousehold Bargaining and Resource Allocation in Developing Countries. World Bank Research Observer, 28(1), pp. 52–
78.
39Hallahan, T. A., Faff, R. W., Mckenzie, M. D. (2004): An empirical investigation of personal financial risk tolerance. Financial Services Review,
13, pp. 57–78.
40Hinz, R. P., Mccarthy, D. D., Turner, J. A. (1997): Are women more conservative investors Gender differences in participant-directed pension
investments, In M. S. Gordon, O. S. Mitchell, & M. M. Twinney (Eds.), Positioning Pensions for the Twenty-First Century. Philadelphia: University of Pennsylvania Press.
41 Grable, J. (2000): Financial risk tolerance and additional factors that affect risk taking in everyday money matters. Journal of Business and
Psychology, 14, pp. 625–630.
42Jianakopolos, N. A., Bernasek, A. (1998): Are women more risk averse? Economic Inquiry, 36, pp. 620–630.
43Embrey, L., Fox, J. (1997): Gender differences in the investment decision-making process. Financial Counseling and Planning, 8(2), pp. 33–40. 44Nelson, J. A. (2015): Are women really more risk-averse than men? A re-analysis of the literature using expanded methods. Journal of Economic
30
Van Rooij et. al. (2011) expounds that:” investment choices depend on financial literacy”.
Chen and Volpe (2002), Lusardi and Mitchell (2008) assumes that:” men are more financially
literate than women are, which could be one reason why men have higher stock market participation rates and as a general rule, holding riskier assets results in higher long-term returns, implying that even with the same level of initial wealth and savings men are able to accumulate more wealth over time”.
Disparities in earnings between gender are a case of richness inequality, and further tax earnings and costs are home-grown, and they rely on the person’s preferences, so therefore life savings could be different among men and women. The further tasks for the female sex are being touched for the reason that they have occupational stops in order to give birth, remaining only some years to work and a decrease of salaries less than the male sex with the same specifics. Female sex used to work half day than the male sex, meaning that they have less salaries. So, when females are less remunerated than men, it means that their capacity to have savings is little and there will be a boost of gender inequality that reflects into richness disparities.
Dolado et. al. (2002) affirms that:” male-dominated professions tend to be better paid than
female-dominated professions are, and occupational segregation is one of the sources of the existing gender wage gap”. And Koellinger et. al. (2013) expounds that: “Men are also more likely to become entrepreneurs and to have self-employment income than women are and as being an entrepreneur is a riskier occupational choice, it is generally also better rewarded”.
14
45Van Rooij, M., Lusardi, A., Alessie, R. (2011): Financial literacy and stock market participation. Journal of Financial Economics, 101(2), pp.
449–472.
46Chen, H., Volpe, R. P. (2002): Gender differences in personal financial literacy among college students. Financial services review, 11(3), pp.
289–307
47Lusardi, A., Mitchell, O. S. (2008): Planning and Financial Literacy: How Do Women Fare? American Economic Review, 98(2), pp. 413–417.
48 Dolado, J., Fergueroso, F., Jimeno, J. (2002): Recent Trends in Occupational Segregation by Gender: A Look Across the Atlantic. Universidad Carlos III de Madrid Working Paper 02-30.
49Koellinger, P., Minniti, M., Schade, C. (2013): Gender differences in entrepreneurial propensity. Oxford Bulletin of Economics and Statistics,
31
The disparities in incomes might bring extra inference to the richness structure. According to HFCN (2016) affirms that:” as credit constraints are higher for lower levels of income, women may be
denied mortgage loans more often than men are”. And Alesina et. al. (2013) shows that:” women also face more stringent conditions for obtaining business credit than men do and consequently, women are less able to benefit by building wealth from owning self-employment businesses or from the long-term rises in house prices that accrue from homeownership and that the gender wealth gap in favor of men may be caused by men inheriting more than women”.
Fessler et al. (2018) says that: “empirical evidence shows that inheritances have a role in explaining
the net wealth of households in a number of western European countries”. According, to Edlund
and Kopczuk (2009) they demonstrate that:” the existing empirical evidence mostly shows for
developed countries that the probability of inheriting is not dependent on gender”. There are
various assumptions that explains about the functions that are attached to the domestic stage of it. There are researches based on the domestic stage regarding the appropriation of finances and are divided into two functions, based on the form of decision. In line with Doss (1996) he assumes that:” a household can act either as a unitary unit or as a collective one and standard
microeconomic theory assumes the unitary model, where household resources are pooled and there is a single utility function and budget constraint. So, the alternative, the collective model, would imply that household members have different preferences and the observed consumption, savings and investment patterns are
the result of bargaining”.
15
50 HFCN (2016): The Household Finance and Consumption Survey: methodological report for the second wave. ECB Statistics Paper Series, No
17/2016.
51Alesina, A. F., Lotti, F., Mistrulli, P. E. (2013): Do women pay more for credit? Evidence from Italy, Journal of the European Economic
Association, 11(S1), pp. 45–66.
52 Fessler, P., Schürz, M. (2018): Private Wealth Across European Countries: The Role of Income, Inheritance and the Welfare State. Journal of
Human Development and Capabilities, pp. 1–29.
53Doss, C. R. (1996): Testing among Models of Intrahousehold Resource Allocation. World Development, 24(10), pp. 1597–1609. 54Edlund, L., Kopczuk, W. (2009): Women, wealth and mobility. American Economic Review, 99(1), pp. 146–178.
32
Even Vogler et al. (2006) and Pahl (2008) says:” the unitary model has frequently been rejected in
empirical studies as it has been shown that households do not exhibit full pooling of resources and that they are moving towards more individualized systems, such as partial pooling.”
Ashby and Burgoyne (2009) demonstrates that: “show that partial pooling is also found for savings.
Bonke (2015), Lundberg et al. (1997), Phipps and Burton (1998), Phipps and Woolley (2008) and explains that: “studies show that the consumption of household members depends on their income shares, as women spend more on children and tend to save less than men”.
Last but not the least, Doss (2013) indicates that:” there is empirical evidence showing that the
bargaining power of women within the family is linked to their education, income and asset.”
If a methodical divergence shows the way of how gender gathers their own economy, or if their love ones are not grouping their entire patrimonies, that means that it could add to the family by owning various richness responsibilities. The conclusion will be that any type of efficient disparities in the so-called wealth gathering among gender type, or even in the family, can direct to gender wealth inequality. And, if richness disparity occurs, then it is essential to apprehend the position of the elements by give an adequate clarification on the disparity.
16
55 Vogler, C., Brockmann, M., Wiggins, R. D. (2006): Intimate relationships and changing patterns of money management at the beginning of the
twenty-first century. The British Journal of Sociology, 57(3), pp. 455–482.
56Pahl, J. (2008): Family finances, individualisation, spending patterns and access to credit. The Journal of Socio-Economics, 37(2), pp. 577–591. 57Phipps, S. A., Burton, P. S. (1998): What’s mine is yours? The influence of male and female incomes on patterns of household expenditure.
Economica, 65(260), pp. 599–613.
58Phipps, S., Woolley, F. (2008): Control over money and the savings decisions of Canadian households. The Journal of Socio-Economics, 37, pp.
592–611.
59Ashby, K. J., Burgoyne, C. B. (2009): The financial practices and perceptions behind separate systems of household financial management. The
Journal of Socio-Economics, 38(3), pp. 519–529.
60Bonke, J. (2015): Pooling of income and sharing of consumption within households. Review of Economics of the Household, 13(1), pp. 73–93. 61Doss, C. R. (2013): Intrahousehold Bargaining and Resource Allocation in Developing Countries. World Bank Research Observer, 28(1), pp. 52–
78.
62Lundberg, S. J., Pollak, R. A., Wales, T. J. (1997): Do Husbands and Wives Pool Their Resources? Evidence from the United Kingdom Child
33
2.5 GENDER WAGE INEQUALITY
Gender inequality among men and women have always existed and we still have it in our society. According, to Burke, 2000, Connell & Messerschmidt, 2005 and Evans et al., 2013:” women’s
disadvantages and discrimination issues at work have been studied in depth by scholars and government bodies”. In Kimmel (2009; 2009: 360), opinion “despite considerable progress, these advancements only represent a partial victory for women because of the remaining obstacle to gender equality – the behaviors and attitudes of men. Changes among men represent the next phase of the movement for women’s equality – that change among men is vital if women are to achieve full equality. Men must come to see that gender equality is in their interests – as men”
Salaries represent one the biggest element in full remuneration, where gender wage inequality has always been examined in the topic of gender disparity. The procedure was hastened by the access to information on occupational earnings, but the unavailability of proper analytical information hindered the additional testing of human inequality in different aspects, like richness and old age allowance.
17
63 Burke, R.J. (2000). Workaholism in Organizations: Concepts, Results and Future Research Directions.
International Journal of Management Reviews, 2(1),1-16.
64Connell, R.W. & Messerschmidt, J.W. (2005). Hegemonic Masculinity: Rethinking the Concept.
Gender & Society, 19(6), 829-859
65 Evans, A.M., Carney, J.S. & Wilkinson, M. (2013). Work-Li fe Balance for Men: Counsel ing
Implications. Journal of Counseling & Development, 91(4), 436-441
66Kimmel, M.S. (2009). Gender Equality: Not for Women Only. In M.F. Özbilgin (Ed.), Equality, Diversity and
34
There are not a lot of writings on the gender wage gap. The review on wage disparity apprehends the discrepancy between salary gainers, that counts a small number of people in the society. But inoccupation earnings are only a partial side of all payments, and it contains salary and freelance work profit, where the overall profit, incorporates belongings, capital gains and funds transfer. The importance of occupational profit differs among individuals, based on age differences.
Salaries are the major and the nearly approachable element of earnings, the gender wage inequality is one of the nearly reviewed issue that has been examined in the topic of gender inequality. The cost-effectiveness of a well-funded job analyzed together with the required instruments to determine gender wage inequality, has been generated in several research articles in order to be able to assess changes that has an impact on the disparity.
Since the '70s, thousands of reviews have attempted to explicate the elements that brings help to wage disparities among gender. The reviews are shared into 2 sides: the first that is examined through the divergences in the visible specifics of gender, and the second one defines the inexplicable definitions of discrimination.
35
Seguino (2000) explicates that:” gender wage inequality might be good for economic growth and
that semi-industrialized export-oriented countries: low wages for female workers in export industries might foster investment, exports, and also growth of the economy in general”. MitraKahn and Mitra-Kahn (2008) made an analysis by saying that:” her results and arguing that discrimination of females was particularly growth-promoting in early stages of development”.
The outgrowths are in a very big opposition to research by demonstrating that gender disparity regarding academic training or approach to occupations are dangerous to increase. Still, Seguino (2000) affirms that:” the study may legitimate gender discrimination as being a
positive factor for economic growth in the economy, yet evidence presented here suggests that gender inequality is a casual factor in investment and economic growth for the semi-industrialized countries in the sample used here and paying lower wages to women with equal productivity, the data she has at her disposal are only aggregate wage gaps”.
18
To reply Seguino’s analysis Weichselbaumer & Winter-Ebmer, (2005) expounds that:” they we
replicate the empirical analysis with internationally comparable gender wage discrimination data coming from a meta-regression on the international gender wage gap and cannot confirm her results by using various definitions of the gender wage gap, none of the regressions show any positive impact of gender wage discrimination on economic growth”.
67Seguino, S. (2000). Gender inequality and economic growth: A crosscountry analysis. World Development, 28(7), 1211–1230. 68Mitra-Kahn, B. H., & Mitra-Kahn, T. (2008). Gender wage gaps and growth: What goes up must come down. Manuscript submitted for
36
The correlation among gender disparities and economical increase is very composite and relies on a lot of believable, straight and circuitous connections. There is a strong proof that gender disparity in academic background is damaging to be increased. The speculative writings assumes that gender disparity will usually decrease staff resources, by damaging the economical increase.
Knowles, Lorgelly, & Owen, (2002) affirms that:” given different talents of children, declining
education to equally-talented females must mean that marginal returns to educating girls must be higher than that of boys, which is inefficient”. But Barro and Lee (1994), Dollar & Gatti, (1999)
and Klasen, (2002) replies that: “they found negative coefficients for female education in growth
regressions, the subsequent literature showed that this result was due to the inclusion of some outliers and multicollinearity between male and female school attainment”.
Galor & Weil (1996), Lagerlo¨f, (2003) and Schultz (1997) says that:” female education might have
positive additional effects, such as reduced fertility, lower child mortality, or higher education of the offspring, which by themselves are all fostering long-term growth perspectives of a country”. A
little more vigorous are the effects regarding women’s approach to occupation.
Klasen and Lamanna (2009) explains that:” investigate the growth implications of employment
gaps”.
19
69 Knowles, S., Lorgelly, P., & Owen, D. (2002). Are educational gender gaps a break on economic development? Oxford Economic Papers, 54,
118–149.
70Barro, R. J., & Lee, J.-W. (1994). Sources of economic growth. Carnegie Rochester Conference Series on Public Policy, 40, 1–46.
71Dollar, D., Gatti, R. (1999). Gender inequality, income and growth: Are good times good for women? Policy Research Report on Gender and
Development Working Paper, No. 1, Washington, D.C.: World Bank.
72Klasen, S. (2002). Low schooling for girls, slower growth for all? Crosscountry evidence on the effect of gender inequality in education on
economic development. World Bank Economic Review, 16, 345–373.
73Galor, O., & Weil, D. N. (1996). The gender gap, fertility, and growth. American Economic Review, 86(1), 374–387 74Lagerlo¨ f, N.-P. (2003). Gender equality and long-run growth. Journal of Economic Growth, 8, 403–426.
75Schultz, P. T. (1997). Demand for children in low-income countries. In M. Rosenzweig, & O. Stark (Eds.), Handbook of population and family
economics. Amsterdam: Elsevier
76Klasen, S., & Lamanna, F. (2009). The impact of gender inequality in education and employment on economic growth: New evidence for a panel
37
Since there is a big quantity of reviews on inequality approach of women to academic schooling, on job trade, and on the rest of fruitful resources, there is a little research on immediate consequence of gender disparities or distinction on increase. There is a discussion towards gender wage differences that calls upon market deformation that is the cause of wage distinction.
Baldwin & Johnson, (1992) says that:” There are efficiency losses concerning the potential of an
economy’s workforce: if discriminated against, women might hesitate to participate in the labor market because their reservation wage is not met”. And other current disparities can have an adverse
impact on human resources outlay.
Sinha, Raju, and Morrison (2007) affirms that:” There is another way how gender aspects might
influence household decisions: a number of studies show that resources devoted to children’s wellbeing rise with mother’s control over these resources”. The inequality that degrades females
earning situation or that hinder them to have access to the man force market can detrimentally concern their bargaining strength among the abode. So, human resources contributions to the future may go through distress and curtail establishment.
According to Thomas (1997) he explains through an example by saying that: “by using household
survey data from Brazil containing information about labor and non-labor income. He finds that increased income for women is linked to a larger share of household budget used for household services, health, and education and results in better outcomes of child health”.
20
77 Baldwin, M., & Johnson, W. G. (1992). Estimating the employment effects of wage discrimination. The Review of Economics and Statistics,
74(3), 446–455.
78 Sinha, N., Raju, D., & Morrison, A. (2007). Gender equality, poverty and economic growth. World Bank Policy Research Working Paper, 4349.
Standing, G. (1999). Global feminization through flexible labor: A theme revisited. World Development, 27(3), 583–602.
79 Thomas, D. (1997). Incomes, expenditures and health outcomes: Evidence on intra-household resource allocation. In L. Haddad, J. Hoddinott, &
H. Alderman (Eds.), Intra-household resource allocation in developing countries: Models, methods, and policy (pp. 142–164). Baltimore: Johns Hopkins Press.
38
Another economist Galor & Weil, (1996) discussed on this topic by saying that:” Another indirect
effect might operate via fertility and fertility decisions of households are also influenced by relative wages of women”.
Seguino (2000) and Blecker & Seguino, (2002) expresses their opinion about this discussion, affirming that:”opportunity costs of children rise with wages, leading to lower population growth and increased level of capital per worker—and, in turn, to higher growth., on the other hand, argues with respect to international competitiveness: gender wage differentials may act as a stimulus to growth in semi-industrialized export-oriented economies. Lower relative wages in female-dominated manufacturing industries will make investment attractive because of high expected profitability; this will boost exports and economic growth and they backed this analysis with a macroeconomic growth model, where lower female wages relax the balance of payment constraint faced by developing countries that require technology imports to move up the industrial ladder”.
Standing (1999) claims that these questions complies with the man force market by saying that:”
that female labor force participation has risen in countries with export-led industrialization due to a pursuit toward lower wages to gain global competitiveness”.
21
80 Galor, O., & Weil, D. N. (1996). The gender gap, fertility, and growth. American Economic Review, 86(1), 374–387. 81Seguino, S. (2000). Gender inequality and economic growth: A crosscountry analysis. World Development, 28(7), 1211–1230.
82Blecker, R., & Seguino, S. (2002). Macroeconomic effects of reducing gender wage inequality. Review of Development Economics, 6(1),
103–119.
39
2.6 DECOMPOSITION OF THE GENDER WAGE GAP
The decomposition of the gender wage gap sprung up from an important research done by Oaxaca
(1973) and Blinder (1973). The major conception of the assumption is to compose the disparity into
dual sides. The first is the arrangement, noticed to be known as the inexplicable and the second is the formulation, also known as the outlined.
There has been a lot of changes and prolongations of this procedure that has been established by so many economists. Starting from Juhn et al. (1991, 1993), they assume that:” there should be an
extended method to study changes over time in the unexplained gap”. Albrecht et al. (2003) and
Machado and Mata (2005) affirms that: “there should be an integrated quantile analysis”. Fairlie (2005) expound that: “the model should be extended to treat dichotomous outcomes”. Then Bauer and Sinning (2008) they affirm to: “modify the model for censored outcomes”. And lastly, we have Ñopo, (2008, a,b) who affirm to: “develop the model for nonparametric setups”
22
84Blinder, A. S. (1973). “Wage discrimination: reduced form and structural estimates”. In: The Journal of Human Resources 8.4, pp. 436–455. 85Albrecht J., Björklund A. Vroman S. (2003). “Is there a glass ceiling in Sweden?” In: Journal of Labour Economics 21.1, pp. 145–177. 86Bauer, T. K. and M. Sinning (2008). “An extension to the Blinder-Oaxaca decomposition to nonlinear models.” In: Advances in Statistical
Analysis 92.2, pp. 197–206.
87Fairlie, R. W. (2005). “An extension of the Blinder-Oaxaca decomposition technique to log and probit models.” In: Journal of Economic and
Social Measurement 30.4, pp. 305–316.
88Juhn, C., K. M. Murphy, and B. Pierce (1991). “Accounting for the slowdown in blackwhite wage convergence.” In: Kosters, M.H. (Ed.),
Workers and Their Wages. AEI Press, pp. 107–143.
89Juhn, C., K. M. Murphy, and B. Pierce (1993). “Wage inequality and the rise in returns to mskill.” In: Journal of Political Economy 101.3, pp.
410–442.
90Machado, J. F. and J. Mata (2005). “Counterfactul decomposition of changes in wage distributions using quantile regression”. In: Journal of
Applied Econometrics 20, pp. 445–465.
91Ñopo, H. (a,2008). “Matching as a tool to decompose wage gaps”. In: The Review of Economics and Statistics 90.2, pp. 290–299.
92 Ñopo, H. (b,2008). “An extension of the Blinder-Oaxaca decomposition to a continuum of comparison groups.” In: Economic Letters 100.2, pp.
292–296.
