Getting what (employers think) you’re worth

Abstract

Purpose – The purpose of this paper is to provide empirical evidence on the gender wage differential of labor market entrants and the determinants of their starting wages. Design/methodology/approach – The paper makes use of a unique data set on graduates in economics from a large German university that contains detailed information on the graduates’ course of study, their additional qualifications and their transition from university to the labor market. Based on these data, Mincer-type earnings functions as well as wage decompositions as proposed by Blinder (1973) and Oaxaca (1973) are performed. Findings – The paper finds a significant gender wage differential of 7 percent. Blinder-Oaxaca decompositions suggest that the major part of this gap remains unexplained by gender differences in observable characteristics. Research limitations/implications – The main feature of our analysis – having a highly homogeneous sample of graduates from a single university – comes at the costs of reduced ability to draw generalized conclusions from our findings. Originality/value – This paper investigates the determinants of entry wages for a homogeneous group of high-skilled workers using a unique data set of graduates in business and economics from a large German university. Concentrating on a highly homogeneous sample limits the problem of unobserved heterogeneity, which results in an overestimation of the unexplained component of standard decompositions analyses. Hence, the finding that a large part of the gender pay gap remains unexplained can be considered as an indicator for gender discrimination in the labor market for economics graduates.