The impact of economic freedom on the gender pay gap: evidence from a survey of UK households

Abstract

PurposeUsing survey datasets, the purpose of this work explores the impact of economic freedom on the gender pay gap in the UK.Design/methodology/approachThe analysis combines Economic Freedom of the World data with the Understanding Society (USoc) Microdata series.FindingsThe results document that economic freedom positively affects the gender pay gap. When the components of the index are considered, the findings indicate different effects of various types of policy, i.e. less government spending, stronger trade liberalization conditions and levels of corruption lead to higher gaps; stronger legal and property rights and a sounder money system have no impact on the gap. Moreover, a stronger impact in the manufacturing industry, part-time workers and those who work in the non-London regions is observed.Practical implicationsThe findings imply that reductions to government spending programmes can potentially aggravate the gap in hourly wages paid between males and females and should, therefore, be implemented. It may be also possible to provide females the training or education necessary to effectively compete in the workforce, before eliminating any spending programme they rely on.Originality/valueThe first study explores the link between economic freedom and gender pay gap through a unique survey dataset with UK households.