Brain versus Brawn: The Realization of Women's Comparative Advantage∗

This paper estimates how much of the post-World War II evolution in employment and average wages by gender can be explained by a model where changing labor demand requirements are the driving force. I argue that a large fraction of the original female employment and wage gaps in mid-century, and the subsequent shrinking of both gaps, can be explained by labor reallocation from brawn-intensive to brain-intensive jobs favoring women's comparative advantage in brain over brawn. Thus, aggregate gender-speci c employment and wage gap trends resulting from this labor reallocation are simulated in a general equilibrium model. This shift in production is able to explain: (1) about 79 percent of the rise in female labor force participation, (2) approximately 37 percent of the stagnation in the average female to male wage ratio from 1960 to 1980, and (3) about 83 percent of the closing wage gap between 1980 and 2005. In contrast, a counterfactual experiment, where agents cannot increase their innate brain abilities through education, fails to match the shape of the wage gap over time, resulting in a stagnant simulated wage gap from the 1960s onward. ∗ I would like to thank, among others, Russell Cooper, Dean Corbae, Fatih Guvenen, Victor Rios-Rull, Kjetil Storesletten, and Fabrizio Zilibotti as well as seminar and conference participants at Brandeis University, Congressional Budget O ce, the University of Texas at Austin, University of Oslo, University of Zurich, Uppsala University, Wellesley College, 2nd Nordic Summer Symposium in Macroeconomics, and NEUDC Conference at Harvard University for valuable comments. Financial support from the European Research Council (ERC Advanced Grant IPCDP229883) and and the centre of Equality, Social Organization, and Performance (ESOP) supported by the Research Council of Norway is gratefully acknowledged. This paper was previously circulated under, Was it Discrimination or the Market? Female Employment and the Wage Gap. †University of Zurich, IEW, Muehlebachstrasse 86 CH-8008 Zurich. Email: [email protected]. All errors are mine.