Rent sharing and the gender wage gap in Belgium

Abstract

This study investigates, on the basis of a unique combination of two large‐scale data sets, how rent sharing interacts with the gender wage gap in the Belgian private sector. Empirical findings show that individual gross hourly wages are significantly and positively related to firm profits‐per‐employee even when controlling for group effects in the residuals, individual and firm characteristics, industry wage differentials and endogeneity of profits. Our instrumented wage‐profit elasticity is of the magnitude 0.06 and it is not significantly different for men and women. Of the overall gender wage gap (on average women earn 23.7 per cent less than men), results show that around 14 per cent can be explained by the fact that on average women are employed in firms where profits‐per‐employee are lower. Thus, findings suggest that a substantial part of the gender wage gap is attributable to the segregation of women in less profitable firms.