Beyond Means: Distributional Analysis of Gender Pay Gaps

Abstract

This paper extends the canonical two-way fixed effects model proposed by Abowd et al. (1999) and Card et al. (2016) using unconditional quantile regressions (UQR) to analyze how firms and individual attributes influence pay dispersion at different points of the earnings distribution. Leveraging administrative employer-employee data from Chile, I find that individual effects account for most of the wage dispersion at upper quantiles, while firm effects explain a much more significant portion of wage dispersion at lower quantiles. Turning to gender inequality, I document that the gender pay gap increases as we move up on the earnings distribution. It is documented that sorting is more important than bargaining to understand firm-driven gaps at the median and top of the distribution, increasing the gender pay gap. However, the bargaining dimension is more relevant at the bottom of the earnings distribution, reducing the gender pay gap. We connect this finding with evidence on gender-based unionization.