The effects of equal pay laws on firm pay premiums: Evidence from Chile

Abstract

© 2022This paper analyzes Chile's 2009 Equal Pay for Equal Work Law (EPL) and its effects on firm pay premiums. The law affected firms with 10 or more workers and specified penalties by firm size, including a disclosure requirement for firms with 200 or more workers. We use matched employer-employee data to estimate worker-firm fixed-effects models, decomposing the firm's contribution to the gender pay gap into bargaining power and sorting channels. The EPL reduces the firm premium gender gap by 6.1%, driven by the bargaining power channel. The effects are larger in firms exposed to higher penalties and disclosure requirements.