The gender wage gap and the role of policy: Analyzing patterns over time, over the life cycle and across the wage distribution

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The gender wage gap is a persistent and pervasive phenomenon observable It has strong implications for a society since it is one main driver of inequality in a country. Therefore, there exists an active public debate and an important academic literature that describes and quantifies the gender wage gap, analyses the reasons for this gap and discusses potential policy reforms to reduce the gender wage gap. In this research project, we aim to extend this literature and to contribute to the policy debate in several dimensions. First, we will focus on the evolution of the gender wage gap in Germany over the last decades. Second, we focus on the gender wage gap over the lifecycle and how it is related to the presence of children. Finally, we will analyze how family policy affects the wages of mothers and the gender wage gap as a whole. One central focus of this project is on heterogeneity: in four different projects, we will analyze the gender wage gap not only for the population mean but for the whole wage distribution and for sub groups of specific interest.In Project 1, we focus on the evolution of the gender gap over time. So far, the vast majority of the literature analyzes the gender wage gap for the population mean. While this evidence is of central importance for the policy debate, the average effects might disguise important heterogeneous effects over the wage distributions. This is particularly important when focusing on the evolution of the gender wage gap over time since wage inequality has been increasing in many countries including Germany. Therefore, in the first part of this research project we will use administrative data to provide a detailed analysis of the evolution of the gender wage gap in Germany over the full income distribution controlling for selection into employment. In Project 2, we analyze the gender wage gap over the lifecycle. Previous literature has documented that the gender wage gap is strongly related to the presence of children. We also want to focus on the effect of children on the gender wage gap, however not only for the sample mean but based on administrative data we will also analyze if and how the effect of children varies over the wage distribution.Finally, we discuss in this project how policy can influence the gender gap. For the policy evaluation we will use reduced form evidence exploiting exogenous regional variation and a dynamic structural life cycle model. Previous literature has shown that employment interruptions, particularly long career breaks of mothers, have negative consequences on future earnings perspectives. We will concentrate on policies which reduce labor market frictions or costs of work such as the provision of child care or which increase working incentives for women.