Unobserved selection heterogeneity and the gender wage gap

Abstract

Selection correction methods usually make assumptions about selection itself. In the case of gender wage gap estimation, those assumptions are especially tenuous because of high female nonparticipation and because selection could be different in different parts of the labor market. This paper proposes an estimator for the wage gap that allows for arbitrary and unobserved heterogeneity in selection. It applies to the subpopulation of always employed women, which is similar to men in labor force characteristics. Using CPS data from 1976 to 2005, I show that the gap has narrowed substantially from a -0.521 to a -0.263 log wage point differential for this population.