Gender Pay Gap and the Firm Effects

The gender pay gap remains persistently high in Korea. I investigate the role of firm in the gender pay gap using linked employer-employee data. The findings show that 30% of the gender pay gap is due to the sorting effect of women being over-employed in low-wage firms, and 13% is due to bargaining and discrimination effect of firms paying differently for work of equal value. The gender pay gap within firms begins to increase in the late 30s, when childbirth and childcare burdens begin to take hold, and widens throughout the working life due to limited career advancement and promotion for women. The higher wage level, the greater the pay gap due to bargaining and discrimination effect. These findings suggest the need for wage transparency policies along with tackling the duality of the labor market.