Selection, Investment, and Women's Relative Wages Over Time (with Yona Rubinstein)

Abstract

In theory, growing wage inequality within gender should cause women to invest more in their market productivity and should differentially pull able women into the workforce. Our paper uses Heckman's two-step estimator and identification at infinity on repeated CPS cross-sections to calculate relative wage series for women since 1970 that hold constant the composition of skills. We find that selection into the female full-time full-year workforce shifted from negative in the 1970s to positive in the 1990s, and that the majority of the apparent narrowing of the gender wage gap reflects changes in female workforce composition. We find the same types of composition changes by measuring husbands' wages and NLS IQ data as proxies for unobserved skills. Our findings help explain why growing wage equality between genders coincided with growing inequality within gender.

accepted, Quarterly Journal of Economics.
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Click here to access the data and STATA do files to replicate Table 1 in our QJE paper. table1short.do does everything except the bootstrapped standard errors. table1boot.do runs the standard errors too, but takes MUCH longer to run. The other do files are used to create the weights needed to combined the regression coefficient estimates into the statistics reported in each of Table 1's cells. The zip file has the pooled CPS dataset.