Decomposing the Gender Pay Gap in Colombia: Do Industry and Type of Worker Matter?

Abstract

Abstract This article aims to quantify to which extent industry and worker characteristics explain the gender pay gap in Colombia. To quantify the role of these factors, we proposed a two-step specification of a counterfactual decomposition method. This specification allows splitting the total gap into the contribution of the employment gender share at the industry level, the demographic composition, and the characteristics’ pay premia. Using Colombian data for 2019 and exploiting the industry and worker type heterogeneity, our findings suggest that the three components are essential to shape the gender pay gap. Despite the pay effect, i.e. what is explained by factors different from socioeconomic characteristics, being the main driver of the gender gap, the labor market sorting is also relevant. The most feminized industries contribute more to enlarge the gender gap, mainly among self-employed workers who have a higher gap that combines wage discrimination and premium gaps and relates to temporal flexibility and unpaid work. Finally, using simulations we show that the proposed two-step decomposition method allows the identification of the relevant components and avoids biases that might result from traditional decomposition methods. JEL code: J16, J31, J24.