Wage Structure Determinants and Gender Pay Gap among Wage Earners: from Mean to Overall Log Wage Distributional Decomposition
JEL Classification: J31, J71
Abstract
This study comprehensively investigates the wage structure determinants and gender pay gap in Korea. Using 2014 Korean Labor and Income Panel Study (KLIPS) data, we find that individual characteristics exhibit significant differences across the distribution and that magnitude and significance differ according to gender. Findings suggest that returns to education are high for women and experience is influential only for women at the upper wage distribution. By applying vigorous counterfactual decomposition method, we find large returns on characteristic differentials by gender, especially for lowly educated women. A strong glass ceiling effect in Korea is obtained, and the integrative effect is composed of the continuously increasing composition effect and N-shaped (i.e., low at both ends) structure effect. In particular, most of the explained differentials are attributable to the differences of experience. The high returns on education for women are beneficial for reducing discrimination (unexplained or structure effect).
Keywords:
Glass ceiling effect, Korean gender pay gap, Unconditional quantile regressionAcknowledgments
This work was supported by a 2-year Research Grant of Pusan National University.
References
- Ahmed, S., and McGillivray, M. “Human Capital, Discrimination, and the Gender Wage Gap in Bangladesh.” World Development 67 (2015): 506–24. [https://doi.org/10.1016/j.worlddev.2014.10.017]
- Albrecht, J., Bjorklund, A., and Vroman, S. “Is There A Glass Ceiling in Sweden?.” Journal of Labor Economics 21 (No. 1 2003): 145–77. [https://doi.org/10.1086/344126]
- Antonczyk, D., Fitzenberger, B., and Sommerfeld, K. “Rising Wage Inequality, the Decline of Collective Bargaining, and the Gender Wage Gap.” Labour Economics 17 (No. 5 2010): 835–47. [https://doi.org/10.1016/j.labeco.2010.04.008]
- Arulampalam, W., Booth, A. L., and Bryan, M. L. “Is There a Glass Ceiling over Europe? Exploring the Gender Pay Gap Across the Wage Distribution.” Industrial and Labor Relations Review 60 (No. 2 2007): 163–86. [https://doi.org/10.1177/001979390706000201]
- Ashenfelter, O., and Zimmerman, D. J. “Estimates of the Returns to Schooling from Sibling Data: Fathers, Sons, and Brothers.” Review of Economics and Statistics 79 (No. 1 1997): 1–9. [https://doi.org/10.1162/003465397556421]
- Autor, D. H., Katz, L. F., Kearney, M. S., Berman, E., and Chandra, A. “The Polarization of the U.S. Labor Market.” American Economic Review 96 (No. 2 2006): 189–94. [https://doi.org/10.1257/000282806777212620]
- Azam, M. “Changes in Wage Structure in Urban India, 1983-2004: A Quantile Regression Decomposition.” World Development 40 (No. 6 2012): 1135–50. [https://doi.org/10.1016/j.worlddev.2012.02.002]
- Baert, S., De Pauw, A.-S., and Deschacht, N. “Do Employer Preferences Contribute to Sticky Floors?” ILR Review 69 (No. 3 2016): 714–36. [https://doi.org/10.1177/0019793915625213]
- Becker, G. S. The Economics of Discrimination(second edition). Chicago: University of Chicago Press, 1971.
- Becker, G. S. “Human Capital, Effort, and the Sexual Division of Labor.” Journal of Labor Economics 3 (No. 1 1985): S33–58. [https://doi.org/10.1086/298075]
- Berger, M. C., Groothuis, P., and Jeon, P. “The Changing Gender Wage Gap in Korea.” Applied Economics Letters 4 (No. 9 1997): 579–82. [https://doi.org/10.1080/135048597355078]
- Blinder, A. S. “Wage Discrimination: Reduced from and Structural Estimates.” Journal of Human Resources 8 (No. 4 1973): 436–55. [https://doi.org/10.2307/144855]
- Bobbitt-zeher, D. “The Gender Income Gap and the Role of Education.” Sociology of Education 80 (No. 1 2007): 1–22. [https://doi.org/10.1177/003804070708000101]
- Booth, A. L., Francesconi, M., and Frank, J. “A Sticky Floors Model of Promotion, Pay, and Gender.” European Economic Review 47 (No. 2 2003): 295–322. [https://doi.org/10.1016/S0014-2921(01)00197-0]
- Bosio, G. “The Implications of Temporary Jobs on the Distribution of Wages in Italy: An Unconditional IVQTE Approach.” Labour 28 (No. 1 2014): 64–86. [https://doi.org/10.1111/labr.12023]
- Buchinsky, M. “The Dynamics of Changes in the Female Wage Distribution in the USA: A Quantile Regression Approach.” Journal of Applied Econometrics 13 (No. 1 1998): 1–30. [https://doi.org/10.1002/(SICI)1099-1255(199801/02)13:1<1::AID-JAE474>3.0.CO;2-A]
- Carrillo, P., Gandelman, N., and Robano, V. “Sticky Floors and Glass Ceilings in Latin America.” The Journal of Economic Inequality 12 (No. 3 2014): 339–61. [https://doi.org/10.1007/s10888-013-9258-3]
- Chi, W., and Li, B. “Glass Ceiling or Sticky Floor? Examining the Gender Earnings Differential across the Earnings Distribution in Urban China, 1987-2004.” Journal of Comparative Economics 36 (No. 2 2008): 243–63. [https://doi.org/10.1016/j.jce.2007.12.001]
- Cho, D. “Why Is the Gender Earnings Gap Greater in Korea than in the United States?.” Journal of the Japanese and International Economies 21(No. 4 2007): 455–69. [https://doi.org/10.1016/j.jjie.2007.02.003]
- Cho, D., Cho, J., and Song, B. “An Empirical Analysis of the Gender Earnings Gap between the Public and Private Sectors in Korea: A Comparative Study with the US.” Journal of the Japanese and International Economies 24 (No. 3 2010): 441–56. [https://doi.org/10.1016/j.jjie.2010.02.001]
- Cho, J., Lee, T., and Jung, H. “Glass Ceiling in A Stratified Labor Market: Evidence from Korea.” Journal of the Japanese and International Economies 32 (2014): 56–70. [https://doi.org/10.1016/j.jjie.2014.01.003]
- Christofides, L. N., Polycarpou, A., and Vrachimis, K. “Gender Wage Gaps, ‘Sticky Floors’ and ‘Glass Ceilings’ in Europe.” Labour Economics 21 (2013): 86–102. [https://doi.org/10.1016/j.labeco.2013.01.003]
- Chzhen, Y., and Mumford, K. “Gender Gaps across the Earnings Distribution for Full-Time Employees in Britain: Allowing for Sample Selection.” Labour Economics 18 (No. 6 2011): 837–44. [https://doi.org/10.1016/j.labeco.2011.05.004]
- Cotton, J. “On the Decomposition of Wage Differentials.” The Review of Economics and Statistics 70 (No. 2 1988): 236–43. [https://doi.org/10.2307/1928307]
- De La Rica, S., Dolado, J. J., and Llorens, V. “Ceilings or floors? Gender Wage Gaps by Education in Spain.” Journal of Population Economics 21(No. 3 2008): 751–76. [https://doi.org/10.1007/s00148-006-0128-1]
- DiNardo, J., Fortin, N. M., and Lemieux, T. “Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach.” Econometrica 64 (No. 5 1996): 1002–44. [https://doi.org/10.2307/2171954]
- del Río, C., Gradín, C., and Cantó, O. “The Measurement of Gender Wage Discrimination: The Distributional Approach Revisited.” Journal of Economic Inequality 9 (No. 1 2011): 57–86. [https://doi.org/10.1007/s10888-010-9130-7]
- Fang, Z., and Sakellariou, C. “A Case of Sticky Floors: Gender Wage Differentials in Thailand.” Asian Economic Journal 25 (No. 1 2011): 35–54. [https://doi.org/10.1111/j.1467-8381.2011.02047.x]
- Fang, Z., and Sakellariou, C. “Glass Ceilings versus Sticky Floors: Evidence from Southeast Asia and an International Update.” Asian Economic Journal 29 (No. 3 2015): 215–42. [https://doi.org/10.1111/asej.12056]
- Firpo, S., Fortin, N. M., and Lemieux, T. “Unconditional Quantile Regressions.” Econometrica 77 (No. 3 2009): 953–73. [https://doi.org/10.3982/ECTA6822]
- Fortin, N. M. “The Gender Wage Gap among Young Adults in the United States the Importance of Money versus People.” Journal of Human Resources 43 (No. 4 2008): 884–918. [https://doi.org/10.3368/jhr.43.4.884]
- Ge, Y., Li, H., and Zhang, J. “Gender Earnings Gaps in Hong Kong: Empirical Evidence from cross the Earnings Distribution in 2006.” China Economic Review 22 (No. 1 (2011): 151–64. [https://doi.org/10.1016/j.chieco.2010.10.002]
- Gunewardena, D., Abeyrathna, D., Ellagala, A., Rajakaruna, K., and Rajendran, S. Glass Ceilings, Sticky Floors or Sticky Doors? A Quantile Regression Approach to Exploring Gender Wage Gaps in Sri Lanka. PMMA Working Paper, 2008. [https://doi.org/10.2139/ssrn.3171575]
- Heckman, J. J., and Rubinstein, Y. “The Importance of Noncognitive Skills: Lessons from the GED Testing Program.” The American Economic Review 91 (No. 2 2001): 145–9. [https://doi.org/10.1257/aer.91.2.145]
- Jann, B. “The Blinder-Oaxaca Decomposition for Linear Regression Models.” The Stata Journal 8 (No. 4 2008): 453–79. [https://doi.org/10.1177/1536867X0800800401]
- Jellal, M., Jalil Nordman, C., and Wolff, F.-C. “Evidence on the Glass Ceiling Effect in France Using Matched Worker-Firm Data.” Applied Economics 40 (No. 24 2008): 3233–50. [https://doi.org/10.1080/00036840600994070]
- Juhn, C., Murphy, K. M., and Pierce, B. “Wage Inequality and the Rise in Returns to Skill.” Journal of Political Economy 101 (No. 3 1993): 410–42. [https://doi.org/10.1086/261881]
- Kee, H. J. “Glass Ceiling or Sticky Floor? Exploring the Australian Gender Pay Gap.” Economic Record 82 (No. 259 2006): 408–27. [https://doi.org/10.1111/j.1475-4932.2006.00356.x]
- Koenker, R., Bassett, G. “Regression Quantiles.” Econometrica 46 (1978): 33–50. [https://doi.org/10.2307/1913643]
- Li, H., and Luo, Y. “Reporting Errors, Ability Heterogeneity, and Returns to Schooling in China.” Pacific Economic Review 9 (No. 3 2004): 191–207. [https://doi.org/10.1111/j.1468-0106.2004.00244.x]
- Machado, J. A. F., and Mata, J. “Counterfactual Decomposition of Changes in Wage Distributions Using Quantile Regression.” Journal of Applied Econometrics 20 (No. 4 2005): 445–65. [https://doi.org/10.1002/jae.788]
- Magnani, E., and Zhu, R. “Gender Wage Differentials among Rural–Urban Migrants in China.” Regional Science and Urban Economics 42 (No. 5 2012): 779–93. [https://doi.org/10.1016/j.regsciurbeco.2011.08.001]
- Matano, A., and Naticchioni, P. “Rent Sharing As a Driver of the Glass Ceiling Effect.” Economics Letters 118 (No. 1 2013): 55–9. [https://doi.org/10.1016/j.econlet.2012.09.011]
- Melly, B. “Decomposition of Differences in Distribution Using Quantile Regression.” Labour Economics 12 (No. 4 2005): 577–90. [https://doi.org/10.1016/j.labeco.2005.05.006]
- Melly, B. Estimation of counterfactual distributions using quantile regression. Swiss Institute for International Economics and Applied Economic Research (SIAW), University of St. Gallen, 2006.
- Messinis, G. “Returns to Education and Urban-Migrant Wage Differentials in China: IV Quantile Treatment Effects.” China Economic Review 26 (No. 1 2013): 39–55. [https://doi.org/10.1016/j.chieco.2013.03.006]
- Miller, P. W. “The Gender Pay Gap in the US: Does Sector Make a Difference?.” Journal of Labor Research 30 (No. 1 2009): 52–74. [https://doi.org/10.1007/s12122-008-9050-5]
- Mussida, C., and Picchio, M. “The Gender Wage Gap by Education in Italy.” The Journal of Economic Inequality 12 (No. 1 2014): 117–47. [https://doi.org/10.1007/s10888-013-9242-y]
- Neumark, D. “Employers’ Discriminatory Behavior and the Estimation of Wage Discrimination.” Journal of Human Resources 23 (No. 3 1988): 279–95. [https://doi.org/10.2307/145830]
- Ng, Y. C. “Gender Earnings Differentials and Regional Economic Development in Urban China.” Review of Income and Wealth 53 (No. 1 2007): 148–66. [https://doi.org/10.1111/j.1475-4991.2007.00221.x]
- Oaxaca, R. “Male-Female Wage Differentials in Urban Labor Markets.” International Economic Review 14 (No. 3 1973): 693–709. [https://doi.org/10.2307/2525981]
- Oaxaca, R. L., and M. R. Ransom. “On Discrimination and the Decomposition of Wage Differentials.” Journal of Econometrics 61 (No. 1 1994): 5–21. [https://doi.org/10.1016/0304-4076(94)90074-4]
- Perugini, C., and Selezneva, E. “Labour Market Institutions, Crisis and Gender Earnings Gap in Eastern Europe.” Economics of Transition 23 (No. 3 2015): 517–64. [https://doi.org/10.1111/ecot.12072]
- Rendall, M. “Structural Change in Developing Countries: Has It Decreased Gender Inequality?” World Development 45 (2013): 1-16. [https://doi.org/10.1016/j.worlddev.2012.10.005]
- Reimers, C. W. “Labor Market Discrimination against Hispanic and Black Men.” The Review of Economics and Statistics 65 (No. 4 1983): 570–9. [https://doi.org/10.2307/1935925]
- Russo, G., and Hassink, W. “Multiple Glass Ceilings.” Industrial Relations: A Journal of Economy and Society 51 (No. 4 2012): 892–915. [https://doi.org/10.1111/j.1468-232X.2012.00705.x]
- Sakellariou, C. “Gender-Earnings Differentials Using Quantile Regressions.” Journal of Labor Research 25 (No. 3 2004): 457–68. [https://doi.org/10.1007/s12122-004-1024-7]
- Sakellariou, C. “The Use of Quantile Regressions in Estimating Gender Wage Differentials: A Case Study of the Philippines.” Applied Economics 36 (No. 9 2004): 1001–7. [https://doi.org/10.1080/0003684042000233230]
- Turner, C. G., and Monk-turner, E. “Earnings Differences in the South Korean Labor Market: Decomposing the Gender Wage Gap, 1988-98.” Seoul Journal of Economics 19 (No. 3 2006): 297–312.
- Vella, F. “Estimating Models with Sample Selection Bias: A Survey.” Journal of Human Resources 33 (No. 1 1998): 127–69. [https://doi.org/10.2307/146317]
- Weichselbaumer, D., and Winter-Ebmer, R. “A Meta-Analysis of the International Gender Wage Gap.” Journal of Economic Surveys 19 (No. 3 2005): 479–512. [https://doi.org/10.1111/j.0950-0804.2005.00256.x]
- Willis, Robert J., and Rosen, Sherwin. “Education and Self-Selection.” The Journal of Political Economy 87 (No. 5 1979): S7–36. [https://doi.org/10.1086/260821]
- Xiu, L., and Gunderson, M. “Glass Ceiling or Sticky Floor? Quantile Regression Decomposition of the Gender Pay Gap in China.” International Journal of Manpower 35 (No. 3 2014): 306–26. [https://doi.org/10.1108/IJM-01-2012-0017]
- Yoo, Gyeongjoon. “Women in the Workplace: Gender and Wage Differentials.” In Doh Chull Shin, Conrad P. Rutkowski and Chong-Min Park (eds.), The Quality of Life in Korea. Netherlands: Springer, pp. 367–85, 2003. [https://doi.org/10.1007/978-94-017-0281-2_18]
- Zhong, H. “Returns to Higher Education in China: What Is the Role of College Quality?” China Economic Review 22 (No. 2 2011): 260–75. [https://doi.org/10.1016/j.chieco.2011.02.002]