Decomposing the gender wage gap

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University of New Brunswick
The gender wage gap persists as an important and controversial topic in various socio-economic agendas and appears as a topic of research in scholarly research regularly. The conventional approach to conducting a gender wage gap assessment is measuring the difference in average earnings between men and women that remains after controlling for various explanatory variables suggested by theory and empirical labor studies. The list of explanatory factors used in particular papers varies depending on the specificity of the population sample, availability of data, research focus and other aspects. Specifically, variation in occupational distribution between men and women in most cases in the literature has been limited to 20-40 fairly broad occupational groups. The inclusion of occupation as an explanatory variable is a controversial approach as it may lead to an undervaluation of the influence of labor market gender segregation tendencies, or, on the opposite, to over-justification of gender-pay differentials. This thesis provides an overview of conventional techniques used for gender wage gap estimations, discusses the importance and appropriateness of occupation as an explanatory variable, and contrasts gender wage gap estimations with and without these controls in the context of the Canadian labor market. Furthermore the thesis tests whether very detailed occupation controls is advantageous compared with a more limited set of broad occupational groups in terms of examination of the wage gap, and suggests evidence for justification of occupational gender segregation that is often perceived as discrimination.