The Gender Pay Gap: A Cross-Country Analysis

The gender wage gap varies across countries. For example, among OECD nations women in Australia, Belgium, Italy and Sweden earn 80% as much as males, whereas in Austria, Canada and Japan women earn about 60% as much as males. Current studies examining cross-country differences focus on the impact of labor market institutions such as minimum wage laws and nationwide collective bargaining. However, these studies neglect labor market institutions that affect women’s lifetime work behavior—a factor crucially important in gender wage gap studies that employ individual data. This paper explicitly concentrates on labor market institutions that are related to female lifetime work. Using ISSP (International Social Survey Programme), LIS (Luxembourg Income Study) and OECD wage data for 40 countries covering 1970-2002, we show that the gender pay gap is positively associated with the fertility rate, positively associated with the husband-wife age gap at first marriage, and positively related to the top marginal tax rate, all factors which negatively affect women’s labor force participation. In addition, we show that collective bargaining, as found in previous studies, is negatively associated with the gender pay gap. Finally, we also find that left leaning governments reduce the gender pay gap more than politically right leaning governments.