Collaborative Research: Understanding the Gender Gap in Earnings: Household Production, Market Production and Labor Contracts

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The purpose of this project is to study the joint determination of gender differences in labormarket outcomes and the division of labor within the household. The PI's analysis is based on two sets of empirical observations. First, there are persistent gender differences in "adjusted" laborearnings and hours worked, at home and on the market. Second, there is a large variation ingender earnings differentials across industries and occupations. The PI's explore the hypothesis that these differentials arise endogenously from the interaction between the intra-household allocation process and labor contracting between firms and workers.The PI's propose that incentive problems on the labor market, due to private information onhousehold decisions, play a crucial role in the emergence of unequal labor market outcomesacross genders. In turn, the differential labor market outcomes influence gender roles within thehousehold, thus generating a feedback mechanism. The presence of incentive problems impliesthat the earnings structure, as well as the earnings level, should be different across genders. The PI's preliminary empirical work with aggregate data is broadly consistent with this hypothesis. Theproposed new work will extend the analysis in a number of directions. Theoretically, the PI's plan touse their framework to evaluate how technological progress in home production may influencegender differences in labor market outcomes and the household division of labor. Empirically, the PI's plan to use micro data to directly evaluate the predictions regarding the interaction between thelabor market and the household, as well as the predictions on the earnings structure by gender.Intellectual MeritThe intended contribution of this project is twofold. The PI's propose the first, to their knowledge,equilibrium model of the feedback between the gender division of labor within the household andgender differences in labor market outcomes. Typically, supply side theories have been used toexplain gender differences in earnings and employment and their evolution over time. These takeas given the division of labor within the household and emphasize its role in causing unequallabor market outcomes. By contrast, in our framework, gender roles are endogenous. Thecenterpiece of their hypothesis is to identify the incentive problem in labor contracting as a sourceof statistical discrimination on the basis of gender.The PI's are also the first to rationalize the large variance in gender earnings and employmentdifferentials across industries and occupations. The variation in the severity of incentive problemsacross industries and occupations can be related to differences in the earnings structure and homehours by gender, and within households across spouses. The proposed empirical analysis will usematched household and earnings data to directly evaluate these predictions.Broader ImpactsThe results of this research will potentially be of interest not only to economists, but also tosociologists, as well as to policymakers. One important implication of the PI's framework is thatgender equality on the labor market is intimately linked to equality in the household division oflabor. Policies aimed at reducing gender disparities in earning opportunities are likely to fail ifthey do not include provisions to reduce the expected contribution of women to home production.The research will also be integrated with the PI's teaching, especially at the graduate level. Itis expected that graduate research assistants will be introduced to important research skills andpotential research topics to develop on their own.