Working Paper: NBER ID: w25387
Authors: David Card; Dean R. Hyslop
Abstract: Although women make up nearly half the U.S. workforce, most studies of earnings inequality focus on men. This is at least in part because of the complexity of modeling both the decision to work (i.e., the extensive margin) and the level of earnings conditional on work (the intensive margin). In this paper we document a series of descriptive facts about female earnings inequality using data for three cohorts in the PSID. We show that inequality in annual earnings of women fell sharply between the late 1960s and the mid-1990s, with a particularly large decline in the extensive margin component. We then fit earnings-generating models that incorporate both intensive- and extensive-margin dynamics to data for the three cohorts. Our models suggest that over 80% of the decline in female earnings inequality can be attributed to a weakening of the link between family-based factors (including the number of children of different ages and the presence and incomes of partners) and the intensive and extensive margins of earnings determination.
Keywords: female earnings; inequality; family characteristics; employment dynamics
JEL Codes: J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| family characteristics (J12) | female earnings inequality (J31) |
| weakening link between family characteristics and earnings determination (J12) | decline in female earnings inequality (J79) |
| rise in average probability of employment (J68) | decline in between-person inequality (D31) |
| family characteristics (J12) | decision to work (extensive margin) (J29) |
| family characteristics (J12) | earnings conditional on work (intensive margin) (J31) |