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Cross-country analysis: Women’s lifetime work participation and the gender pay gap

Polachek and Xiang (2015) investigate the correlation of women’s incentives for lifetime labour force participation with the gender pay gap across countries. The results show a positive relation of the gender pay gap with the fertility rate, the age gap between husband and wife at the first marriage and the top marginal tax rate.

Polachek and Xiang (2015) use data from the International Social Survey Programme, the Luxembourg Income Study and OECD wage data for 35 countries covering a period from 1970 to 2002. The authors concentrate on labour market institutions, which are assumed to affect women’s lifetime work behaviour and by that affect the gender pay gap.

Firstly, the authors expect high fertility rates to be positively correlated with the gender pay gap. This is because women are expected to drop out of the labour force after childbirth more frequently than men and, consequently, acquire less work experience. Secondly, a more pronounced age gap in a marriage is likely to come along with a larger gap in the accumulated work experiences and wages of a husband and wife. Therefore, the authors assume that women in countries with a larger age gap between husband and wife are more likely to have fewer incentives to participate in the labour market. Thirdly, Polachek and Xiang (2015) examine the effect of country-specific income tax regimes on the gender pay gap.

According to the authors, high income taxes should have a stronger negative effect on women’s earnings because their labour supply is more elastic. In other words, married women are more likely to drop out of the labour market or reduce working hours than married men when a larger proportion of the second earners income is lost due to a higher marginal tax rate. Furthermore, females’ educational attainment is expected to induce higher labour force participation of women and increases their human capital stock. Both should have a diminishing effect on the gender pay gap.

The study of Polachek and Xiang (2015) provide empirical evidence for the hypotheses discussed above. The results support the assumption that the gender wage gap is at least partly affected by women’s lifetime labour force participation. Therefore, it provides an explanation why the gender wage gap is narrowing despite a wider dispersion in the overall wage structure.

Polachek, Solomon W. / Xiang, Jun, 2015, The Gender Pay Gap Across Countries: A Human Capital Approach, LIS Working Paper Series, No. 646