“Firm-specific pay policies Importance on the gender wage gap after equal pay law"

Abstract

This paper analyses Chile’s narrowing Gender Wage Gap in light of the Equal Pay for Equal Work Law (EPL) promotion in 2009. We use matched employer-employee data to estimate two-way workerfirm fixed-effect models, decomposing the firm’s contribution to the pay gap into bargaining and sorting channels and its evolution in the 2010-2020 period. While our data show a reduction in the gap over time, we find that the firms’ contribution increases steadily. Firm-specific pay policies explained a 22% of the gap in 2010-2013, while they end up explaining a 53% in 2016-2019. Growth in the bargaining channel mainly drives this evolution, while sorting decreases its importance over time. In addition to past studies, these results suggest that while firms may have restructured their salary schemes because of EPL, they managed to accommodate and keep their gender-differentiated pay premiums. We do not have evidence to relate the fall in the gap to the wage policies firms implemented, if not despite them.