Gender Pay Gap, Statistical Discrimination Based on Effort and Social Norms

Abstract

We develop a structural framework in which gender wage differentials arise as competitive equilibrium outcomes from effort-cost heterogeneity and employer expectations under imperfect information. In the model, caregiving responsibilities increase the cost of supplying work effort, particularly for women, while employers form wage offers using group-level expected productivity shaped by gender social norms. This interaction generates persistent gender wage gaps that can be decomposed into productivity-related differences and expectation-driven statistical discrimination. Using U.S. Current Population Survey data for 2002, 2014, and 2024, we estimate the wage equation implied by the model and recover structural parameters governing effort costs and employer expectations. Interpreted as a model-based structural decomposition conditional on the framework’s maintained assumptions, the estimates attribute 22–31 % of the gender pay gap in skilled occupations and 20–35 % in unskilled occupations to the model-implied statistical-discrimination mechanism, with the remaining share reflecting productivity-related heterogeneity. Several model-implied restrictions are broadly consistent with the data, supporting the proposed mechanism. Counterfactual exercises suggest that equal-pay mandates and parental-leave reforms are more effective when they reshape caregiving norms and employer expectations; otherwise, their effects may be limited or may generate unintended labor-supply and wage-setting adjustments.